Question 1

If the nominal interest rate is 6 percent and the real interest rate is 2 percent,then what is the inflation rate?

Accepted Answer

A)  8 percent 
B)  4 percent 
C)  3 percent 
D)  None of the above is correct. 
A)  8 percent 
B)  4 percent 
C)  3 percent 
D)  None of the above is correct.

Question 2

In 2008,XYZ Corporation had total earnings of $200 million and 50 million shares of the corporation's stock were outstanding.If the price-earnings ratio for XYZ is 20,then what is the price of a share of its stock?

Accepted Answer

A)  $5 
B)  $10 
C)  $80 
D)  $500 
A)  $5 
B)  $10 
C)  $80 
D)  $500

Question 3

Which of the following would be included as investment in the GDP accounts?

Accepted Answer

A)  the government buys goods from another country 
B)  someone buys stock in an American company 
C)  a firm increases its capital stock 
D)  All of the above are correct. 
A)  the government buys goods from another country 
B)  someone buys stock in an American company 
C)  a firm increases its capital stock 
D)  All of the above are correct.

Question 4

A certificate of indebtedness that specifies the obligations of the borrower to the holder is called a

Accepted Answer

A)  bond. 
B)  stock. 
C)  mutual fund. 
D)  All of the above are correct. 
A)  bond. 
B)  stock. 
C)  mutual fund. 
D)  All of the above are correct.

Question 5

If the nominal interest rate is 10 percent and the inflation rate is 4 percent,then the real interest rate is

Accepted Answer

A)  14 percent. 
B)  6 percent. 
C)  2.5 percent. 
D)  .4 percent. 
A)  14 percent. 
B)  6 percent. 
C)  2.5 percent. 
D)  .4 percent.

Question 6

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

Accepted Answer

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

Question 7

If the government instituted an investment tax credit,then which of the following would be higher in equilibrium?

Accepted Answer

A)  saving and the interest rate 
B)  saving but not the interest rate 
C)  the interest rate but not saving 
D)  neither saving nor the interest rate 
A)  saving and the interest rate 
B)  saving but not the interest rate 
C)  the interest rate but not saving 
D)  neither saving nor the interest rate

Question 8

In the national income accounting identity showing the equality between national saving and investment,what are the algebraic expressions for private saving and public saving?

Accepted Answer

Private saving is Y

Question 9

A larger budget surplus

Accepted Answer

A)  raises the interest rate and investment. 
B)  reduces the interest rate and investment. 
C)  raises the interest rate and reduces investment. 
D)  reduces the interest rate and raises investment. 
A)  raises the interest rate and investment. 
B)  reduces the interest rate and investment. 
C)  raises the interest rate and reduces investment. 
D)  reduces the interest rate and raises investment.

Question 10

Which of the following is both a store of value and a common medium of exchange?

Accepted Answer

A)  corporate bonds 
B)  mutual funds 
C)  checking account balances 
D)  All of the above are correct. 
A)  corporate bonds 
B)  mutual funds 
C)  checking account balances 
D)  All of the above are correct.

Question 11

An increase in the budget deficit

Accepted Answer

A)  makes investment spending fall. 
B)  makes investment spending rise. 
C)  does not affect investment spending. 
D)  may increase,decrease,or not affect investment spending. 
A)  makes investment spending fall. 
B)  makes investment spending rise. 
C)  does not affect investment spending. 
D)  may increase,decrease,or not affect investment spending.

Question 12

The demand for loanable funds comes from saving and the supply of loanable funds comes from investment.

Accepted Answer

A) True 
 B)False

Question 13

Queen City Sausage stock is selling at $40 per share,it has retained earnings of $2.00 per share and dividends of $.50 per share.What is the price-earnings ratio and what is the dividend yield?

Accepted Answer

A)  20,1.25 percent 
B)  20,6.25 percent 
C)  16,1.25 percent 
D)  None of the above is correct. 
A)  20,1.25 percent 
B)  20,6.25 percent 
C)  16,1.25 percent 
D)  None of the above is correct.

Question 14

The number of shares of Biggie Corporation stock outstanding in 2007 was 100 million.In 2007,Biggie stock paid a dividend of $2.40 per share and its dividend yield was 4 percent.If the price-earnings ratio is 16,then Biggie's total earnings in 2007 amounted to

Accepted Answer

A)  $1.92 million. 
B)  $87.50 million. 
C)  $375.00 million. 
D)  $960.00 million. 
A)  $1.92 million. 
B)  $87.50 million. 
C)  $375.00 million. 
D)  $960.00 million.

Question 15

Suppose a country repealed its investment tax credit.The effects of this are represented by shifting the

Accepted Answer

A)  demand for and the supply of loanable funds to the right. 
B)  demand for and the supply of loanable funds to the left. 
C)  supply of loanable funds to the right and the demand for loanable funds to the left. 
D)  None of the above is correct. 
A)  demand for and the supply of loanable funds to the right. 
B)  demand for and the supply of loanable funds to the left. 
C)  supply of loanable funds to the right and the demand for loanable funds to the left. 
D)  None of the above is correct.

Question 16

Draw and label a graph showing equilibrium in the market for loanable funds.

Accepted Answer

Market for

Question 17

If a firm sells a total of 100 shares of stock,then

Accepted Answer

A)  each share represents 1 percent of the firm's indebtedness. 
B)  each share represents ownership of 1 percent of the firm. 
C)  the firm is engaging in debt finance. 
D)  the firm is engaging in term finance. 
A)  each share represents 1 percent of the firm's indebtedness. 
B)  each share represents ownership of 1 percent of the firm. 
C)  the firm is engaging in debt finance. 
D)  the firm is engaging in term finance.

Question 18

If Proctor and Gamble sells a bond it is

Accepted Answer

A)  borrowing directly from the public. 
B)  borrowing indirectly from the public. 
C)  lending directly to the public. 
D)  lending indirectly to the public. 
A)  borrowing directly from the public. 
B)  borrowing indirectly from the public. 
C)  lending directly to the public. 
D)  lending indirectly to the public.

Question 19

In the language of macroeconomics,investment refers to

Accepted Answer

A)  saving. 
B)  the purchase of new capital. 
C)  the purchase of stocks,bonds,or mutual funds. 
D)  All of the above are correct. 
A)  saving. 
B)  the purchase of new capital. 
C)  the purchase of stocks,bonds,or mutual funds. 
D)  All of the above are correct.

Question 20

Nastech Pharmaceuticals announced it has developed a nasal spray that would reduce hunger cravings.Other things the same we would expect

Accepted Answer

A)  the demand for existing shares of stock in this company to decrease,so the price would fall. 
B)  the demand for existing shares of stock in this company to increase,so the price would rise. 
C)  the supply of existing shares of stock in this company to decrease,so the price would fall. 
D)  the supply of existing shares of stock in this company to increase,so the price would rise. 
A)  the demand for existing shares of stock in this company to decrease,so the price would fall. 
B)  the demand for existing shares of stock in this company to increase,so the price would rise. 
C)  the supply of existing shares of stock in this company to decrease,so the price would fall. 
D)  the supply of existing shares of stock in this company to increase,so the price would rise.

Exam 26: Saving, investment, and the Financial System

If the nominal interest rate is 6 percent and the real interest rate is 2 percent,then what is the inflation rate?

In 2008,XYZ Corporation had total earnings of $200 million and 50 million shares of the corporation's stock were outstanding.If the price-earnings ratio for XYZ is 20,then what is the price of a share of its stock?

Which of the following would be included as investment in the GDP accounts?

A certificate of indebtedness that specifies the obligations of the borrower to the holder is called a

If the nominal interest rate is 10 percent and the inflation rate is 4 percent,then the real interest rate is

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

If the government instituted an investment tax credit,then which of the following would be higher in equilibrium?

In the national income accounting identity showing the equality between national saving and investment,what are the algebraic expressions for private saving and public saving?

A larger budget surplus

Which of the following is both a store of value and a common medium of exchange?

An increase in the budget deficit

The demand for loanable funds comes from saving and the supply of loanable funds comes from investment.

Queen City Sausage stock is selling at $40 per share,it has retained earnings of $2.00 per share and dividends of $.50 per share.What is the price-earnings ratio and what is the dividend yield?

The number of shares of Biggie Corporation stock outstanding in 2007 was 100 million.In 2007,Biggie stock paid a dividend of $2.40 per share and its dividend yield was 4 percent.If the price-earnings ratio is 16,then Biggie's total earnings in 2007 amounted to

Suppose a country repealed its investment tax credit.The effects of this are represented by shifting the

Draw and label a graph showing equilibrium in the market for loanable funds.

If a firm sells a total of 100 shares of stock,then

If Proctor and Gamble sells a bond it is

In the language of macroeconomics,investment refers to

Nastech Pharmaceuticals announced it has developed a nasal spray that would reduce hunger cravings.Other things the same we would expect

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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