Exam 27: Saving, Investment and the Financial System

The market for loanable funds can be modeled on a supply and demand schedule even though there are many exogenous circumstances that affect the price of funds.

What would happen in the market for loanable funds if the government were to decrease the tax on interest income?

Financial markets are the institutions through which a person who wants to save can directly supply funds to a person who wants to borrow.

Using a graph representing the market for loanable funds, show and explain what happens to interest rates and investment if the investment tax credit is abolished.

IIn a closed economy, national saving:

When setting up a business, you might need to purchase a building, computer, filing cabinets and furniture. This type of purchase would be called ____ by an economist.

The demand for loanable funds is downward-sloping because:

A budget surplus is created when the government:

Government policies are incapable of influencing interest rates and, therefore, cannot affect society's allocation of scarce resources.

Investing in managed funds is an attempt to diversify risk across a range of investment options.

Which of the following equations represents the GDP in an open economy?

Financial intermediaries are:

Dean Martin's income was $1000 in 1950. If the annual interest rate was 5 per cent, then the present value of his 1950 income in the year 2000 would be:

Dividends are the only way shareholders increase their wealth owning shares.

Long-term bonds usually pay a higher interest rate than do short-term bonds because long-term bonds are riskier.

Playworld is thinking about investing in a new theme park. Suppose that the project costs $7 million and will yield the company $20 million in 10 years. If the interest rate is 5%, what is the present value of the yield in 10 years? What will be the future value of the $7 million investment? Should Playworld invest in the project?

The national income accounting identity S = I shows that saving and investment are equal for every individual household or firm.

Banks play two primary roles in the economy: they take in deposits from savers and lend these to borrowers, and they facilitate purchases of goods and services by allowing people to write cheques against their deposits.

All else being equal, when people become less optimistic about a company's future, then:

Which of the following statements is not correct about notional accounting identity?