Exam 26: Saving, investment, and the Financial System

Suppose a government that taxed all interest income changed its tax law so that the first $5,000 of a taxpayer's interest income was tax free.This would shift the

Suppose the Move It! exercise chain has revenues of $45 million,accounting costs of $15 million,and currently has issued 10 million shares of stocks selling at $90 each.Compute the price-earning ratio.Show your work.Is this ratio relatively high or low? What might an increase in the price-earnings ratio indicate?

In the loanable funds model,an increase in an investment tax credit would create a

Most entrepreneurs do not have enough money of their own to start their businesses.When they acquire the necessary funds from someone else,

If in a closed economy Y = $11 trillion,which of the following combinations would be consistent with national saving of $2.5 trillion?

Index funds are usually outperformed by mutual funds that are actively managed by professional money managers.

Figure 26-3.The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves. -Refer to Figure 26-3.A shift of the demand curve from D₁ to D₂ is called

Financial intermediaries are

Joan uses some of her income to buy mutual fund shares.A macroeconomist refers to Joan's purchase as investment.

Generally,if people begin to expect a company to have higher future profits,the price of the company's stock will begin to decrease.

An increase in the budget deficit shifts the demand for loanable funds to the right.

Skyline Chili wants to finance the purchase of new equipment for its restaurants.The firm has limited internal funds,so Skyline likely will

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

Which of the following would not be a result of replacing the income tax with a consumption tax so that interest income was no longer taxed?

Fred is considering expanding his dress shop.If interest rates rise he is

If the nominal interest rate is 5 percent and the rate of inflation is 2 percent,then the real interest rate is

If the government's expenditures exceeded its receipts,it would likely

All else equal,when people become more optimistic about a company's future,the

The Eye of Horus incense company has $10 million in cash which it has accumulated from retained earnings.It was planning to use the money to build a new factory.Recently,the rate of interest has increased.The increase in the rate of interest should

According to the definitions of national saving and private saving,if Y,C,and G remained the same,an increase in taxes would