Question 1

In a closed economy,national saving is

Accepted Answer

A)  usually greater than investment. 
B)  equal to investment. 
C)  usually less than investment because of the leakage of taxes. 
D)  always less than investment. 
A)  usually greater than investment. 
B)  equal to investment. 
C)  usually less than investment because of the leakage of taxes. 
D)  always less than investment.

Question 2

Figure 26-2.The figure depicts a supply-of-loanable-funds curve and two
demand-for-loanable-funds curves.  
-Refer to Figure 26-2.What is measured along the horizontal axis of the graph?

Accepted Answer

A)  the quantity of loanable funds 
B)  the size of the government budget deficit or surplus 
C)  the real interest rate 
D)  the nominal interest rate 
A)  the quantity of loanable funds 
B)  the size of the government budget deficit or surplus 
C)  the real interest rate 
D)  the nominal interest rate

Question 3

Figure 26-1.The figure depicts a demand-for-loanable-funds curve and two
supply-of-loanable-funds curves.  
-Refer to Figure 26-1.What is measured along the vertical axis of the graph?

Accepted Answer

A)  the nominal interest rate 
B)  the real interest rate 
C)  the quantity of investment 
D)  the quantity of saving 
A)  the nominal interest rate 
B)  the real interest rate 
C)  the quantity of investment 
D)  the quantity of saving

Question 4

Suppose a country had a smaller increase in debt in 2008 than it had in 2007.Then other things the same,we would expect

Accepted Answer

A)  lower interest rates and investment in 2008 than in 2007. 
B)  lower interest rates and greater investment in 2008 than in 2007. 
C)  higher interest rates and greater investment in 2008 than in 2007. 
D)  higher interest rates and lower investment in 2008 than in 2007. 
A)  lower interest rates and investment in 2008 than in 2007. 
B)  lower interest rates and greater investment in 2008 than in 2007. 
C)  higher interest rates and greater investment in 2008 than in 2007. 
D)  higher interest rates and lower investment in 2008 than in 2007.

Question 5

Which of the following equations will always represent GDP in an open economy?

Accepted Answer

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

Question 6

An increase in the budget deficit would cause a

Accepted Answer

A)  shortage of loanable funds at the original interest rate,which would lead to falling interest rates. 
B)  surplus of loanable funds at the original interest rate,which would lead to rising interest rates. 
C)  shortage of loanable funds at the original interest rate,which would lead to rising interest rates. 
D)  surplus of loanable funds at the original interest rate,which would lead to falling interest rates. 
A)  shortage of loanable funds at the original interest rate,which would lead to falling interest rates. 
B)  surplus of loanable funds at the original interest rate,which would lead to rising interest rates. 
C)  shortage of loanable funds at the original interest rate,which would lead to rising interest rates. 
D)  surplus of loanable funds at the original interest rate,which would lead to falling interest rates.

Question 7

In the Coen Brothers' movie The Hudsucker Proxy the board of directors picks someone to run the company who they believe will make poor decisions.If things turn out as they plan,

Accepted Answer

A)  the price of a share of stock in the Hudsucker corporation should decline as the demand for shares falls. 
B)  the price of a share of stock in the Hudsucker corporation should rise as the demand for shares rises. 
C)  the price of a share of stock in the Hudsucker corporation should decline as the supply of existing shares falls. 
D)  the price of a share of stock in the Hudsucker corporation should rise as the supply of existing shares rises. 
A)  the price of a share of stock in the Hudsucker corporation should decline as the demand for shares falls. 
B)  the price of a share of stock in the Hudsucker corporation should rise as the demand for shares rises. 
C)  the price of a share of stock in the Hudsucker corporation should decline as the supply of existing shares falls. 
D)  the price of a share of stock in the Hudsucker corporation should rise as the supply of existing shares rises.

Question 8

If Canada increases its budget deficit,it will reduce

Accepted Answer

A)  private saving and so shift the supply of loanable funds left. 
B)  investment and so shift the demand for loanable funds left. 
C)  public saving and so shift the supply of loanable funds left. 
D)  None of the above is correct. 
A)  private saving and so shift the supply of loanable funds left. 
B)  investment and so shift the demand for loanable funds left. 
C)  public saving and so shift the supply of loanable funds left. 
D)  None of the above is correct.

Question 9

If there is a shortage of loanable funds,then

Accepted Answer

A)  the quantity of loanable funds demanded is greater than the quantity of loanable funds supplied and the interest rate is above equilibrium. 
B)  the quantity of loanable funds demanded is greater than the quantity of loanable funds supplied and the interest rate is below equilibrium. 
C)  the quantity of loanable funds supplied is greater than the quantity of loanable funds demanded and the interest rate is above equilibrium. 
D)  the quantity of loanable funds supplied is greater than the quantity of loanable funds demanded and the interest rate is below equilibrium. 
A)  the quantity of loanable funds demanded is greater than the quantity of loanable funds supplied and the interest rate is above equilibrium. 
B)  the quantity of loanable funds demanded is greater than the quantity of loanable funds supplied and the interest rate is below equilibrium. 
C)  the quantity of loanable funds supplied is greater than the quantity of loanable funds demanded and the interest rate is above equilibrium. 
D)  the quantity of loanable funds supplied is greater than the quantity of loanable funds demanded and the interest rate is below equilibrium.

Question 10

Which of the following is not a nonsensical headline?

Accepted Answer

A)  British perpetuities about to mature. 
B)  Disney issues new bonds with term of $1,000 each. 
C)  Government bonds currently pay less interest than corporate bonds. 
D)  Standard and Poor's judges new junk bond to have very low credit risk. 
A)  British perpetuities about to mature. 
B)  Disney issues new bonds with term of $1,000 each. 
C)  Government bonds currently pay less interest than corporate bonds. 
D)  Standard and Poor's judges new junk bond to have very low credit risk.

Question 11

Scenario 26-1.Assume the following information for an imaginary,closed economy.
GDP = $110,000;consumption = $70,000;private saving = $8,000;national
saving = $12,000.
-Refer to Scenario 26-1.For this economy,investment amounts to

Accepted Answer

A)  $4,000. 
B)  $8,000. 
C)  $12,000. 
D)  $16,000. 
A)  $4,000. 
B)  $8,000. 
C)  $12,000. 
D)  $16,000.

Question 12

Alberta buys a paint sprayer and a lift for her car customizing shop.A macroeconomist would refer to these purchases as investment.

Accepted Answer

A) True 
 B)False

Question 13

Profits not paid out to stockholders are

Accepted Answer

A)  retained earnings. 
B)  known as dividends. 
C)  the denominator in the price-earnings ratio. 
D)  All of the above are correct. 
A)  retained earnings. 
B)  known as dividends. 
C)  the denominator in the price-earnings ratio. 
D)  All of the above are correct.

Question 14

Which of the two bonds in each example would you expect to generally pay the higher interest rate? Explain why.
a.
a U.S.government bond or a Brazilian government bond
b.
a U.S.government bond or a municipal bond with the same term and issued by a creditworthy municipality.
c.
a 6-month Treasury bill or a 20-year Treasury bond
d.
a Microsoft bond or a bond issued by a new recording company

Accepted Answer

a.
The Brazilian government bond would l

Question 15

The source of the supply of loanable funds is

Accepted Answer

A)  saving,and the source of the demand for loanable funds is investment. 
B)  consumption,and the source of the demand for loanable funds is investment. 
C)  investment,and the source of the demand for loanable funds is saving. 
D)  the interest rate,and the source of the demand for loanable funds is saving. 
A)  saving,and the source of the demand for loanable funds is investment. 
B)  consumption,and the source of the demand for loanable funds is investment. 
C)  investment,and the source of the demand for loanable funds is saving. 
D)  the interest rate,and the source of the demand for loanable funds is saving.

Question 16

Suppose the economy is closed and consumption is 6,500,taxes are 1,500,and government purchases are 2,000.If national saving amounts to 1,000,then what is GDP?

Accepted Answer

A)  9,500 
B)  10,000 
C)  10,500 
D)  None of the above is correct. 
A)  9,500 
B)  10,000 
C)  10,500 
D)  None of the above is correct.

Question 17

Which of the following is correct?

Accepted Answer

A)  Some bonds have terms as short as a few months. 
B)  Because they are so risky,junk bonds pay a low rate of interest. 
C)  Corporations buy bonds to raise funds. 
D)  All of the above are correct. 
A)  Some bonds have terms as short as a few months. 
B)  Because they are so risky,junk bonds pay a low rate of interest. 
C)  Corporations buy bonds to raise funds. 
D)  All of the above are correct.

Question 18

A budget deficit

Accepted Answer

A)  changes the supply of loanable funds. 
B)  changes the demand for loanable funds. 
C)  changes both the supply of and demand for loanable funds. 
D)  does not influence the supply of or the demand for loanable funds. 
A)  changes the supply of loanable funds. 
B)  changes the demand for loanable funds. 
C)  changes both the supply of and demand for loanable funds. 
D)  does not influence the supply of or the demand for loanable funds.

Question 19

Metals,Inc.has a price of $20 a share,outstanding shares of 2.5 million,retained earnings of $1 million dollars,and a dividend yield of 2 percent.It has a price-earnings ratio of

Accepted Answer

A)  50,which is high by historical standards. 
B)  50,which is low by historical standards. 
C)  25,which is high by historical standards. 
D)  25,which is low by historical standards. 
A)  50,which is high by historical standards. 
B)  50,which is low by historical standards. 
C)  25,which is high by historical standards. 
D)  25,which is low by historical standards.

Question 20

Banks and mutual funds are examples of financial markets.

Accepted Answer

A) True 
 B)False

Exam 26: Saving, investment, and the Financial System

In a closed economy,national saving is

Figure 26-2.The figure depicts a supply-of-loanable-funds curve and two demand-for-loanable-funds curves. -Refer to Figure 26-2.What is measured along the horizontal axis of the graph?

Figure 26-1.The figure depicts a demand-for-loanable-funds curve and two supply-of-loanable-funds curves. -Refer to Figure 26-1.What is measured along the vertical axis of the graph?

Suppose a country had a smaller increase in debt in 2008 than it had in 2007.Then other things the same,we would expect

Which of the following equations will always represent GDP in an open economy?

An increase in the budget deficit would cause a

In the Coen Brothers' movie The Hudsucker Proxy the board of directors picks someone to run the company who they believe will make poor decisions.If things turn out as they plan,

If Canada increases its budget deficit,it will reduce

If there is a shortage of loanable funds,then

Which of the following is not a nonsensical headline?

Scenario 26-1.Assume the following information for an imaginary,closed economy. GDP = $110,000;consumption = $70,000;private saving = $8,000;national saving = $12,000. -Refer to Scenario 26-1.For this economy,investment amounts to

Alberta buys a paint sprayer and a lift for her car customizing shop.A macroeconomist would refer to these purchases as investment.

Profits not paid out to stockholders are

The source of the supply of loanable funds is

Suppose the economy is closed and consumption is 6,500,taxes are 1,500,and government purchases are 2,000.If national saving amounts to 1,000,then what is GDP?

Which of the following is correct?

A budget deficit

Metals,Inc.has a price of $20 a share,outstanding shares of 2.5 million,retained earnings of $1 million dollars,and a dividend yield of 2 percent.It has a price-earnings ratio of

Banks and mutual funds are examples of financial markets.

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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