Question 1

Suppose Microsoft sells a bond.What is the company doing?

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 2

When a corporation experiences financial problems,bondholders are paid before shareholders.

Accepted Answer

A) True 
 B)False

Question 3

The following table shows information about bonds issued by governments and companies in Canada,sorted by increasing maturity.(Source: Globe and Mail,retrieved 12 August,2010,http: / / www.globeinvestor.com / servlet / Page / document / v5 / data / bonds / .)Does this information support the theory that less risky bonds yield lower returns? Explain your answer.

Accepted Answer

According to the theory,the return on a

Question 4

Suppose that investment rises and interest rates fall.Which statement best explains these changes?

Accepted Answer

A)  The government has replaced the consumption tax with an income tax. 
B)  The government instituted an investment tax credit. 
C)  The government reduced the tax rate on savings. 
D)  The government repealed an investment tax credit. 
A)  The government has replaced the consumption tax with an income tax. 
B)  The government instituted an investment tax credit. 
C)  The government reduced the tax rate on savings. 
D)  The government repealed an investment tax credit.

Question 5

Which of the following identities shows that GDP is both total income and total expenditure?

Accepted Answer

A)  GDP = Y 
B)  Y = PI + DI + NX 
C)  GDP = GNP - NX 
D)  Y = C + I + G + NX 
A)  GDP = Y 
B)  Y = PI + DI + NX 
C)  GDP = GNP - NX 
D)  Y = C + I + G + NX

Question 6

Suppose that interest rates fall and investment falls.Which statement best explains these changes?

Accepted Answer

A)  The government went from a surplus to a deficit. 
B)  The government has repealed an investment tax credit. 
C)  The government has replaced a consumption tax with an income tax. 
D)  The government is allowing limited nontaxable savings deposits. 
A)  The government went from a surplus to a deficit. 
B)  The government has repealed an investment tax credit. 
C)  The government has replaced a consumption tax with an income tax. 
D)  The government is allowing limited nontaxable savings deposits.

Question 7

In terms of riskiness,how do long-term bonds and short-term bonds compare?

Accepted Answer

A)  Short-term bonds are more risky and so pay higher interest. 
B)  Short-term bonds are less risky and so pay lower interest. 
C)  Short-term bonds are less risky and so pay higher interest. 
D)  Short-term bonds have about the same degree of risk and so pay about the same interest. 
A)  Short-term bonds are more risky and so pay higher interest. 
B)  Short-term bonds are less risky and so pay lower interest. 
C)  Short-term bonds are less risky and so pay higher interest. 
D)  Short-term bonds have about the same degree of risk and so pay about the same interest.

Question 8

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)  chequing account balances 
D)  a pension plan 
A)  corporate bonds 
B)  mutual funds 
C)  chequing account balances 
D)  a pension plan

Question 9

When opening a spa,you may need to buy tables,a sound system,and credit card processing equipment.What do economists call these expenditures?

Accepted Answer

A)  capital investment 
B)  investment in human capital 
C)  business consumption expenditures 
D)  inventories 
A)  capital investment 
B)  investment in human capital 
C)  business consumption expenditures 
D)  inventories

Question 10

If there is surplus of loanable funds,what is most likely to happen?

Accepted Answer

A)  The supply for loanable funds shifts right and the demand shifts left. 
B)  The supply for loanable funds shifts left and the demand shifts right. 
C)  Neither curve shifts,but the quantity of loanable funds supplied increases and the quantity demanded decreases as the interest rate rises to equilibrium. 
D)  Neither curve shifts,but the quantity of loanable funds supplied decreases and the quantity demanded increases as the interest rate falls to equilibrium. 
A)  The supply for loanable funds shifts right and the demand shifts left. 
B)  The supply for loanable funds shifts left and the demand shifts right. 
C)  Neither curve shifts,but the quantity of loanable funds supplied increases and the quantity demanded decreases as the interest rate rises to equilibrium. 
D)  Neither curve shifts,but the quantity of loanable funds supplied decreases and the quantity demanded increases as the interest rate falls to equilibrium.

Question 11

What is public saving equal to?

Accepted Answer

A)  national saving 
B)  the total amount that consumers save 
C)  government spending plus transfers minus government revenue 
D)  government revenue minus government spending minus transfers 
A)  national saving 
B)  the total amount that consumers save 
C)  government spending plus transfers minus government revenue 
D)  government revenue minus government spending minus transfers

Question 12

Country A has taxes of $40 billion,transfers of $30 billion,and government expenditures on goods and services of $30 billion.How much is Country A's deficit?

Accepted Answer

A)  $0 billion 
B)  $10 billion 
C)  $20 billion 
D)  $30 billion 
A)  $0 billion 
B)  $10 billion 
C)  $20 billion 
D)  $30 billion

Question 13

In a closed economy,what remains after paying for consumption and government purchases?

Accepted Answer

A)  national disposable income 
B)  national saving 
C)  public saving 
D)  private saving 
A)  national disposable income 
B)  national saving 
C)  public saving 
D)  private saving

Question 14

Table 8-2
The following table shows stock prices and volumes for a few hypothetical companies.  
-Refer to Table 8-2.Which company had the lowest dollar dividend?

Accepted Answer

A)  P 
B)  Q 
C)  R 
D)  S 
A)  P 
B)  Q 
C)  R 
D)  S

Question 15

If a share of stock in Skylight Chili Ltd.sells for $75,the retained earnings per share are $5,and the divided per share is $2,then the price / earnings ratio is 15.

Accepted Answer

A) True 
 B)False

Question 16

If Huedepool Beer runs into financial difficulty,how are bondholders and shareholders paid?

Accepted Answer

A)  Shareholders are paid before bondholders. 
B)  Shareholders are paid after bondholders. 
C)  Shareholders and bondholders are paid proportional shares of the company's assets. 
D)  Shareholders receive all the company's assets. 
A)  Shareholders are paid before bondholders. 
B)  Shareholders are paid after bondholders. 
C)  Shareholders and bondholders are paid proportional shares of the company's assets. 
D)  Shareholders receive all the company's assets.

Question 17

What does a low P / E for a stock indicate?

Accepted Answer

A)  People may expect earnings to fall in the future perhaps because the firm will be faced with increased competition. 
B)  Its dividends have been low so that no one is willing to pay very much for it. 
C)  The corporation is possibly overvalued. 
D)  It is always a good time for buying the company's stock. 
A)  People may expect earnings to fall in the future perhaps because the firm will be faced with increased competition. 
B)  Its dividends have been low so that no one is willing to pay very much for it. 
C)  The corporation is possibly overvalued. 
D)  It is always a good time for buying the company's stock.

Question 18

The country of Nemedia does not trade with any other country.Its GDP is $20 billion.Its government collects $4 billion in taxes and pays out $3 billion to households in the form of transfer payments.Consumption equals $13 billion,and investment equals $2 billion.What is the value of the goods and services purchased by the government of Nemedia?

Accepted Answer

A)  $3 billion 
B)  $5 billion 
C)  $17 billion 
D)  $19 billion 
A)  $3 billion 
B)  $5 billion 
C)  $17 billion 
D)  $19 billion

Question 19

When the government runs a budget deficit,what is most likely to happen?

Accepted Answer

A)  Interest rates become lower than they would be otherwise. 
B)  National saving gets higher than it would be otherwise. 
C)  Investment gets lower than it would be otherwise. 
D)  Government debt decreases by the amount of the deficit. 
A)  Interest rates become lower than they would be otherwise. 
B)  National saving gets higher than it would be otherwise. 
C)  Investment gets lower than it would be otherwise. 
D)  Government debt decreases by the amount of the deficit.

Question 20

Which statement best defines a corporation's earnings?

Accepted Answer

A)  They are the amount of revenue the corporation receives for the sale of its products,minus its costs of production,as measured by its accountants,minus the dividends paid out. 
B)  They are the amount of revenue the corporation receives for the sale of its products,minus its direct and indirect costs of production,as measured by its economists,minus the dividends paid out. 
C)  They are the amount of revenue the corporation receives for the sale of its products,minus its costs of production,as measured by its accountants. 
D)  They are the amount of revenue the corporation receives for the sale of its products,minus its direct and indirect costs of production,as measured by its economists. 
A)  They are the amount of revenue the corporation receives for the sale of its products,minus its costs of production,as measured by its accountants,minus the dividends paid out. 
B)  They are the amount of revenue the corporation receives for the sale of its products,minus its direct and indirect costs of production,as measured by its economists,minus the dividends paid out. 
C)  They are the amount of revenue the corporation receives for the sale of its products,minus its costs of production,as measured by its accountants. 
D)  They are the amount of revenue the corporation receives for the sale of its products,minus its direct and indirect costs of production,as measured by its economists.

Suppose Microsoft sells a bond.What is the company doing?

When a corporation experiences financial problems,bondholders are paid before shareholders.

Suppose that investment rises and interest rates fall.Which statement best explains these changes?

Which of the following identities shows that GDP is both total income and total expenditure?

Suppose that interest rates fall and investment falls.Which statement best explains these changes?

In terms of riskiness,how do long-term bonds and short-term bonds compare?

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

When opening a spa,you may need to buy tables,a sound system,and credit card processing equipment.What do economists call these expenditures?

If there is surplus of loanable funds,what is most likely to happen?

What is public saving equal to?

Country A has taxes of $40 billion,transfers of $30 billion,and government expenditures on goods and services of $30 billion.How much is Country A's deficit?

In a closed economy,what remains after paying for consumption and government purchases?

Table 8-2 The following table shows stock prices and volumes for a few hypothetical companies. -Refer to Table 8-2.Which company had the lowest dollar dividend?

If a share of stock in Skylight Chili Ltd.sells for $75,the retained earnings per share are $5,and the divided per share is $2,then the price / earnings ratio is 15.

If Huedepool Beer runs into financial difficulty,how are bondholders and shareholders paid?

What does a low P / E for a stock indicate?

When the government runs a budget deficit,what is most likely to happen?

Which statement best defines a corporation's earnings?

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

Suppose Microsoft sells a bond.What is the company doing?

When a corporation experiences financial problems,bondholders are paid before shareholders.

Suppose that investment rises and interest rates fall.Which statement best explains these changes?

Which of the following identities shows that GDP is both total income and total expenditure?

Suppose that interest rates fall and investment falls.Which statement best explains these changes?

In terms of riskiness,how do long-term bonds and short-term bonds compare?

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

When opening a spa,you may need to buy tables,a sound system,and credit card processing equipment.What do economists call these expenditures?

If there is surplus of loanable funds,what is most likely to happen?

What is public saving equal to?

Country A has taxes of $40 billion,transfers of $30 billion,and government expenditures on goods and services of $30 billion.How much is Country A's deficit?

In a closed economy,what remains after paying for consumption and government purchases?

Table 8-2 The following table shows stock prices and volumes for a few hypothetical companies. -Refer to Table 8-2.Which company had the lowest dollar dividend?

If a share of stock in Skylight Chili Ltd.sells for $75,the retained earnings per share are $5,and the divided per share is $2,then the price / earnings ratio is 15.

If Huedepool Beer runs into financial difficulty,how are bondholders and shareholders paid?

What does a low P / E for a stock indicate?

When the government runs a budget deficit,what is most likely to happen?

Which statement best defines a corporation's earnings?

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