Question 1

What is a dividend yield?

Accepted Answer

A)  It is the dividend as a percentage of the stock price. 
B)  It is the stock price as a percentage of the dividend. 
C)  It is the dividend as a percentage of the retained earnings per share. 
D)  It is the retained earnings per share as a percentage of the dividend. 
A)  It is the dividend as a percentage of the stock price. 
B)  It is the stock price as a percentage of the dividend. 
C)  It is the dividend as a percentage of the retained earnings per share. 
D)  It is the retained earnings per share as a percentage of the dividend.

Question 2

Table 8-4  
-Refer to the Table 8-4.Supposing the market for loanable funds is in equilibrium,what is the quantity of funds demanded?

Accepted Answer

A)  $10 billion 
B)  $15 billion 
C)  $20 billion 
D)  $25 billion 
A)  $10 billion 
B)  $15 billion 
C)  $20 billion 
D)  $25 billion

Question 3

The model of the market for loanable funds shows that an investment tax credit will cause interest rates and investment to rise.Yet our model of how investors behave claims that higher interest rates lead to lower investment.How can these two opposing statements be reconciled?

Accepted Answer

The claim that an increase in the intere

Question 4

When the government runs a budget deficit,national saving is reduced,interest rates rise,and investment falls.

Accepted Answer

A) True 
 B)False

Question 5

Corporate bonds generally have higher interest rates than federal government bonds.

Accepted Answer

A) True 
 B)False

Question 6

Which statement best characterizes the lending strategy of banks?

Accepted Answer

A)  Banks make most their profits from account fees. 
B)  Banks lend mostly to large and familiar companies rather than smaller local firms. 
C)  Banks charge borrowers a slightly lower interest rate than they pay to depositors. 
D)  Banks lend money both for investment and consumption purposes. 
A)  Banks make most their profits from account fees. 
B)  Banks lend mostly to large and familiar companies rather than smaller local firms. 
C)  Banks charge borrowers a slightly lower interest rate than they pay to depositors. 
D)  Banks lend money both for investment and consumption purposes.

Question 7

What makes Y = C + I + G + NX an identity?

Accepted Answer

A)  Each symbol identifies a variable. 
B)  The right-hand and left-hand sides are equal. 
C)  The equality holds due to the way the variables are defined. 
D)  This relationship is identical for all economies. 
A)  Each symbol identifies a variable. 
B)  The right-hand and left-hand sides are equal. 
C)  The equality holds due to the way the variables are defined. 
D)  This relationship is identical for all economies.

Question 8

Which of the following best describes the evolution of Canadian national debt between 1996 and 2011?

Accepted Answer

A)  It fell by 10 percent of GDP. 
B)  It fell,and then it rose. 
C)  It fell by $60 billion. 
D)  It fell by 36 percent of GDP. 
A)  It fell by 10 percent of GDP. 
B)  It fell,and then it rose. 
C)  It fell by $60 billion. 
D)  It fell by 36 percent of GDP.

Question 9

Suppose Sarah Lee Corporation stock has a P / E ratio of 10.Which statement best describes this P / E ratio?

Accepted Answer

A)  The P / E ratio is low,indicating that buyers may expect earnings to rise. 
B)  The P / E ratio is low,indicating that buyers may expect earnings to fall. 
C)  The P / E ratio is high,indicating that buyers may expect earnings to rise. 
D)  The P / E ratio is high,indicating that buyers may expect earnings to fall. 
A)  The P / E ratio is low,indicating that buyers may expect earnings to rise. 
B)  The P / E ratio is low,indicating that buyers may expect earnings to fall. 
C)  The P / E ratio is high,indicating that buyers may expect earnings to rise. 
D)  The P / E ratio is high,indicating that buyers may expect earnings to fall.

Question 10

Country B has private savings of $60 billion and investment expenditures of $50 billion.How much is Country B's deficit?

Accepted Answer

A)  -$20 billion 
B)  -$10 billion 
C)  $10 billion 
D)  $20 billion 
A)  -$20 billion 
B)  -$10 billion 
C)  $10 billion 
D)  $20 billion

Question 11

Suppose the following equations give the demand and supply for loanable funds in billions of dollars; r is the real interest rate in percentage points :
QD = 160 - 10r
QS = -20 + 20r
Now,assume the government wishes to stimulate consumption,and imposes a tax on interest earnings of 40 percent.
a)How do the demand and supply equations change to reflect the interest earnings tax?
b)Calculate the new equilibrium interest rate and quantity of loanable funds.(Compare this to the zero-tax equilibrium.)
c)Calculate the changes in consumer and producer surplus due to the tax.Who gains and who loses from the tax?

Accepted Answer

a)The new demand and supply for loanable

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

Other things being constant,when a business issues more stock,what happens?

Accepted Answer

A)  The supply of the stock is greater and thus the price will fall. 
B)  The supply of the stock is less and thus the price will rise. 
C)  The demand for the stock is greater and thus the price will rise. 
D)  The demand for the stock is less and thus the price will fall. 
A)  The supply of the stock is greater and thus the price will fall. 
B)  The supply of the stock is less and thus the price will rise. 
C)  The demand for the stock is greater and thus the price will rise. 
D)  The demand for the stock is less and thus the price will fall.

Question 14

A company releases the following information:
Number of shares (in thousands)= 7500
Dividend = $0.12
Dividend yield = 0.7%
Profit (in thousands)= $1500
a.Calculate the share price.
b.Calculate the market value of the firm (the total value of the firm's stock).
c.Calculate earnings per share and the P / E ratio.
d.Is this company expensive relative to its earnings?

Accepted Answer

a.The dividend yield is the percentage o

Question 15

What is the effect of an increase in the tax rate on interest income on the supply of and the demand for loanable funds?

Accepted Answer

A)  The supply curve shifts to the left,while the demand curve remains unchanged. 
B)  The supply curve shifts to the right,while the demand curve remains unchanged. 
C)  The supply curve remains unchanged,while the demand curve shifts to the left. 
D)  The supply curve remains unchanged,while the demand curve shifts to the right. 
A)  The supply curve shifts to the left,while the demand curve remains unchanged. 
B)  The supply curve shifts to the right,while the demand curve remains unchanged. 
C)  The supply curve remains unchanged,while the demand curve shifts to the left. 
D)  The supply curve remains unchanged,while the demand curve shifts to the right.

Question 16

If Parliament instituted an investment tax credit,the demand for loanable funds would shift right.

Accepted Answer

A) True 
 B)False

Question 17

How does the risk of long-term bonds compare with short-term bonds?

Accepted Answer

A)  Long-term bonds are generally less risky than short-term bonds and so pay higher interest. 
B)  Long-term bonds are generally less risky than short-term bonds and so pay lower interest. 
C)  Long-term bonds are generally more risky than short-term bonds and so pay higher interest. 
D)  Long-term bonds are generally more risky than short-term bonds and so pay lower interest. 
A)  Long-term bonds are generally less risky than short-term bonds and so pay higher interest. 
B)  Long-term bonds are generally less risky than short-term bonds and so pay lower interest. 
C)  Long-term bonds are generally more risky than short-term bonds and so pay higher interest. 
D)  Long-term bonds are generally more risky than short-term bonds and so pay lower interest.

Question 18

Which term refers to institutions that help to match one person's saving with another person's investment?

Accepted Answer

A)  the Bank of Canada 
B)  the banking system 
C)  the monetary system 
D)  the financial system 
A)  the Bank of Canada 
B)  the banking system 
C)  the monetary system 
D)  the financial system

Question 19

Suppose that Parliament were to institute an investment tax credit.What would most likely happen in the market for loanable funds?

Accepted Answer

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

Question 20

World Wide Delivery Service Corporation develops a way to speed up its deliveries and reduce its costs.What would we expect?

Accepted Answer

A)  This would raise the demand for existing shares of the stock,causing its price to rise. 
B)  This would decrease the demand for existing shares of the stock,causing its price to fall. 
C)  This would raise the supply of the existing shares of stock,causing its price to rise. 
D)  This would raise the supply of the existing shares of stock,causing its price to fall. 
A)  This would raise the demand for existing shares of the stock,causing its price to rise. 
B)  This would decrease the demand for existing shares of the stock,causing its price to fall. 
C)  This would raise the supply of the existing shares of stock,causing its price to rise. 
D)  This would raise the supply of the existing shares of stock,causing its price to fall.

What is a dividend yield?

Table 8-4 -Refer to the Table 8-4.Supposing the market for loanable funds is in equilibrium,what is the quantity of funds demanded?

The model of the market for loanable funds shows that an investment tax credit will cause interest rates and investment to rise.Yet our model of how investors behave claims that higher interest rates lead to lower investment.How can these two opposing statements be reconciled?

When the government runs a budget deficit,national saving is reduced,interest rates rise,and investment falls.

Corporate bonds generally have higher interest rates than federal government bonds.

Which statement best characterizes the lending strategy of banks?

What makes Y = C + I + G + NX an identity?

Which of the following best describes the evolution of Canadian national debt between 1996 and 2011?

Suppose Sarah Lee Corporation stock has a P / E ratio of 10.Which statement best describes this P / E ratio?

Country B has private savings of $60 billion and investment expenditures of $50 billion.How much is Country B's deficit?

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

Other things being constant,when a business issues more stock,what happens?

What is the effect of an increase in the tax rate on interest income on the supply of and the demand for loanable funds?

If Parliament instituted an investment tax credit,the demand for loanable funds would shift right.

How does the risk of long-term bonds compare with short-term bonds?

Which term refers to institutions that help to match one person's saving with another person's investment?

Suppose that Parliament were to institute an investment tax credit.What would most likely happen in the market for loanable funds?

World Wide Delivery Service Corporation develops a way to speed up its deliveries and reduce its costs.What would we expect?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Small Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

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Exam 8: Saving, investment, and the Financial System

What is a dividend yield?

Table 8-4 -Refer to the Table 8-4.Supposing the market for loanable funds is in equilibrium,what is the quantity of funds demanded?

The model of the market for loanable funds shows that an investment tax credit will cause interest rates and investment to rise.Yet our model of how investors behave claims that higher interest rates lead to lower investment.How can these two opposing statements be reconciled?

When the government runs a budget deficit,national saving is reduced,interest rates rise,and investment falls.

Corporate bonds generally have higher interest rates than federal government bonds.

Which statement best characterizes the lending strategy of banks?

What makes Y = C + I + G + NX an identity?

Which of the following best describes the evolution of Canadian national debt between 1996 and 2011?

Suppose Sarah Lee Corporation stock has a P / E ratio of 10.Which statement best describes this P / E ratio?

Country B has private savings of $60 billion and investment expenditures of $50 billion.How much is Country B's deficit?

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

Other things being constant,when a business issues more stock,what happens?

What is the effect of an increase in the tax rate on interest income on the supply of and the demand for loanable funds?

If Parliament instituted an investment tax credit,the demand for loanable funds would shift right.

How does the risk of long-term bonds compare with short-term bonds?

Which term refers to institutions that help to match one person's saving with another person's investment?

Suppose that Parliament were to institute an investment tax credit.What would most likely happen in the market for loanable funds?

World Wide Delivery Service Corporation develops a way to speed up its deliveries and reduce its costs.What would we expect?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Small Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

Filters