Question 1

Public saving is equal to national saving minus private saving.

Accepted Answer

A) True 
 B)False

Question 2

Other things the same,bonds are likely to have higher interest rates if they have

Accepted Answer

A)  tax exemptions and short terms. 
B)  tax exemptions and long terms. 
C)  no tax exemptions and short terms. 
D)  no tax exemptions and long terms. 
A)  tax exemptions and short terms. 
B)  tax exemptions and long terms. 
C)  no tax exemptions and short terms. 
D)  no tax exemptions and long terms.

Question 3

Figure 26-3.The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves.  
-Refer to Figure 26-3.What,specifically,does the label on the vertical axis,i,represent?

Accepted Answer

A)  the nominal interest rate 
B)  the real interest rate 
C)  the inflation rate 
D)  the dividend yield 
A)  the nominal interest rate 
B)  the real interest rate 
C)  the inflation rate 
D)  the dividend yield

Question 4

Other things the same,when the interest rate rises,

Accepted Answer

A)  people would want to lend more,making the supply of loanable funds increase. 
B)  people would want to lend less,making the supply of loanable funds decrease. 
C)  people would want to lend more,making the quantity of loanable funds supplied increase. 
D)  people would want to lend less,making the quantity of loanable funds supplied decrease. 
A)  people would want to lend more,making the supply of loanable funds increase. 
B)  people would want to lend less,making the supply of loanable funds decrease. 
C)  people would want to lend more,making the quantity of loanable funds supplied increase. 
D)  people would want to lend less,making the quantity of loanable funds supplied decrease.

Question 5

What are the basic differences between bonds and stocks?

Accepted Answer

A bond is a certificate of indebtedness

Question 6

According to the loanable funds model,which of the following events would result in higher interest rates and greater saving?

Accepted Answer

A)  Firms become pessimistic about the future and,as a result,they cut back on their plans to buy new equipment and build new factories. 
B)  The government goes from running a budget deficit to running a budget surplus. 
C)  Congress passes a reform of the tax laws that encourages greater saving. 
D)  Congress passes a reform of the tax laws that encourages greater investment. 
A)  Firms become pessimistic about the future and,as a result,they cut back on their plans to buy new equipment and build new factories. 
B)  The government goes from running a budget deficit to running a budget surplus. 
C)  Congress passes a reform of the tax laws that encourages greater saving. 
D)  Congress passes a reform of the tax laws that encourages greater investment.

Question 7

When a country saves a larger portion of its GDP than it did before,it will have

Accepted Answer

A)  more capital and higher productivity. 
B)  more capital and lower productivity. 
C)  less capital and higher productivity. 
D)  less capital and lower productivity. 
A)  more capital and higher productivity. 
B)  more capital and lower productivity. 
C)  less capital and higher productivity. 
D)  less capital and lower productivity.

Question 8

Zeta Corporation has a price of $20 a share,outstanding shares of 2.5 million,retained earnings of $1 million dollars,and a dividend yield of 1 percent.It has a price-earnings ratio which is

Accepted Answer

A)  high,perhaps indicating that people expect future earnings to rise. 
B)  high,perhaps indicating that people expect future earnings to fall. 
C)  low,perhaps indicating that people expect future earnings to rise. 
D)  low,perhaps indicating that people expect future earnings to fall. 
A)  high,perhaps indicating that people expect future earnings to rise. 
B)  high,perhaps indicating that people expect future earnings to fall. 
C)  low,perhaps indicating that people expect future earnings to rise. 
D)  low,perhaps indicating that people expect future earnings to fall.

Question 9

If the government institutes policies that increase incentives to save,then in the loanable funds market

Accepted Answer

A)  the demand for loanable funds shifts right. 
B)  the demand for loanable funds shifts left. 
C)  the supply of loanable funds shifts right. 
D)  the supply of loanable funds shifts left. 
A)  the demand for loanable funds shifts right. 
B)  the demand for loanable funds shifts left. 
C)  the supply of loanable funds shifts right. 
D)  the supply of loanable funds shifts left.

Question 10

If the demand for loanable funds shifts to the left,then the equilibrium interest rate

Accepted Answer

A)  and quantity of loanable funds rise. 
B)  and quantity of loanable funds fall. 
C)  rises and the quantity of loanable funds falls. 
D)  falls and the quantity of loanable funds rises. 
A)  and quantity of loanable funds rise. 
B)  and quantity of loanable funds fall. 
C)  rises and the quantity of loanable funds falls. 
D)  falls and the quantity of loanable funds rises.

Question 11

Public saving is T - G,while private saving is Y - T - C.

Accepted Answer

A) True 
 B)False

Question 12

Institutions that help to match one person's saving with another person's investment are collectively called the

Accepted Answer

A)  Federal Reserve system. 
B)  banking system. 
C)  monetary system. 
D)  financial system. 
A)  Federal Reserve system. 
B)  banking system. 
C)  monetary system. 
D)  financial system.

Question 13

In which of the following cases would it necessarily be true that national saving and private saving are equal for a closed economy?

Accepted Answer

A)  Private saving is equal to government expenditures. 
B)  Public saving is equal to investment. 
C)  After paying their taxes and paying for their consumption,households have nothing left. 
D)  The government's tax revenue is equal to its expenditures. 
A)  Private saving is equal to government expenditures. 
B)  Public saving is equal to investment. 
C)  After paying their taxes and paying for their consumption,households have nothing left. 
D)  The government's tax revenue is equal to its expenditures.

Question 14

Which of the following would necessarily increase the equilibrium interest rate?

Accepted Answer

A)  The demand for and the supply of loanable funds shift right. 
B)  The demand for and the supply of loanable funds shift left. 
C)  The demand for loanable funds shifts right and the supply of loanable funds shifts left. 
D)  The demand for loanable funds shifts left and the supply of loanable funds shifts right. 
A)  The demand for and the supply of loanable funds shift right. 
B)  The demand for and the supply of loanable funds shift left. 
C)  The demand for loanable funds shifts right and the supply of loanable funds shifts left. 
D)  The demand for loanable funds shifts left and the supply of loanable funds shifts right.

Question 15

Your brother-in-law wants to buy either stock or bonds in Cedar Valley Furniture,which manufactures wooden furniture.He wants your advice on whether to buy stock or bonds.Explain how each of his quotes below should affect his choice between the stock and the bond.
a.
"I have reason to believe that people are soon going to find rocking chairs have health benefits."
b.
"I would like to tell people I am part owner of Cedar Valley Furniture."
c.
"I do not want to take on much risk."

Accepted Answer

a.
Presumably,when this happens,unless e

Question 16

Consider the expressions T - G and Y - T - C.Which of the following statements is correct?

Accepted Answer

A)  Each one of these is equal to national saving. 
B)  Each one of these is equal to public saving. 
C)  The first of these is private saving;the second one is public saving. 
D)  The first of these is public saving;the second one is private saving. 
A)  Each one of these is equal to national saving. 
B)  Each one of these is equal to public saving. 
C)  The first of these is private saving;the second one is public saving. 
D)  The first of these is public saving;the second one is private saving.

Question 17

Most entrepreneurs finance their purchases of real capital using their past saving.

Accepted Answer

A) True 
 B)False

Question 18

A national chain of grocery stores wants to finance the construction of several new stores.The firm has limited internal funds,so it likely will

Accepted Answer

A)  demand the required funds by buying bonds. 
B)  demand the required funds by selling bonds. 
C)  supply the required funds by buying bonds. 
D)  supply the required funds by selling bonds. 
A)  demand the required funds by buying bonds. 
B)  demand the required funds by selling bonds. 
C)  supply the required funds by buying bonds. 
D)  supply the required funds by selling bonds.

Question 19

Which of the following equations represents GDP for a closed economy?

Accepted Answer

A)  Y = C + I + G + T 
B)  S = I - G 
C)  I = Y - C + G 
D)  Y = C + I + G 
A)  Y = C + I + G + T 
B)  S = I - G 
C)  I = Y - C + G 
D)  Y = C + I + G

Question 20

As chief financial officer you sell newly issued bonds on behalf of your firm.Your firm is

Accepted Answer

A)  borrowing directly. 
B)  borrowing indirectly. 
C)  lending directly. 
D)  lending indirectly. 
A)  borrowing directly. 
B)  borrowing indirectly. 
C)  lending directly. 
D)  lending indirectly.

Exam 26: Saving, investment, and the Financial System

Public saving is equal to national saving minus private saving.

Other things the same,bonds are likely to have higher interest rates if they have

Figure 26-3.The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves. -Refer to Figure 26-3.What,specifically,does the label on the vertical axis,i,represent?

Other things the same,when the interest rate rises,

What are the basic differences between bonds and stocks?

According to the loanable funds model,which of the following events would result in higher interest rates and greater saving?

When a country saves a larger portion of its GDP than it did before,it will have

Zeta Corporation has a price of $20 a share,outstanding shares of 2.5 million,retained earnings of $1 million dollars,and a dividend yield of 1 percent.It has a price-earnings ratio which is

If the government institutes policies that increase incentives to save,then in the loanable funds market

If the demand for loanable funds shifts to the left,then the equilibrium interest rate

Public saving is T - G,while private saving is Y - T - C.

Institutions that help to match one person's saving with another person's investment are collectively called the

In which of the following cases would it necessarily be true that national saving and private saving are equal for a closed economy?

Which of the following would necessarily increase the equilibrium interest rate?

Consider the expressions T - G and Y - T - C.Which of the following statements is correct?

Most entrepreneurs finance their purchases of real capital using their past saving.

A national chain of grocery stores wants to finance the construction of several new stores.The firm has limited internal funds,so it likely will

Which of the following equations represents GDP for a closed economy?

As chief financial officer you sell newly issued bonds on behalf of your firm.Your firm is

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Application: The Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

The Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Trade-Off Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

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