Question 1

What would an increase in the budget deficit most likely do to investment spending?

Accepted Answer

A)  It would make investment spending fall because the interest rate rises. 
B)  It would make investment spending rise because the interest rate falls. 
C)  It would make investment spending fall because the interest rate falls. 
D)  It would make investment spending rise because the interest rate rises. 
A)  It would make investment spending fall because the interest rate rises. 
B)  It would make investment spending rise because the interest rate falls. 
C)  It would make investment spending fall because the interest rate falls. 
D)  It would make investment spending rise because the interest rate rises.

Question 2

You have two sets of estimates of national account numbers for a closed economy for next year.In the first set,government expenditures will be $30 billion,transfer payments will be $10 billion,and taxes will be $45 billion.Under the second set,GDP will be $200 billion,taxes will be $50 billion,transfer payments will be $20 billion,consumption will be $120 billion,and investment will be $40 billion.Based on these numbers,what are the respective estimated results?

Accepted Answer

A)  $15 billion surplus and a $10 billion surplus 
B)  $15 billion surplus and a $10 billion deficit 
C)  $5 billion surplus and a $10 billion surplus 
D)  $5 billion surplus and a $10 billion deficit 
A)  $15 billion surplus and a $10 billion surplus 
B)  $15 billion surplus and a $10 billion deficit 
C)  $5 billion surplus and a $10 billion surplus 
D)  $5 billion surplus and a $10 billion deficit

Question 3

If you know that Alberta Dreams Corporation,a travel equipment and clothing company,has revenues of $30 million and accounting costs of $10 million,you also know that its earnings are $20 million.

Accepted Answer

A) True 
 B)False

Question 4

What is a bond?

Accepted Answer

A)  a financial intermediary 
B)  a certificate of indebtedness 
C)  a certificate of partial ownership in an enterprise 
D)  a mortgage 
A)  a financial intermediary 
B)  a certificate of indebtedness 
C)  a certificate of partial ownership in an enterprise 
D)  a mortgage

Question 5

Which term refers to a certificate of indebtedness that specifies the obligations of the borrower to the holder?

Accepted Answer

A)  bond 
B)  stock 
C)  mutual fund 
D)  savings plan 
A)  bond 
B)  stock 
C)  mutual fund 
D)  savings plan

Question 6

What does the slope of the demand for loanable funds curve represent?

Accepted Answer

A)  the positive relation between the real interest rate and investment 
B)  the negative relation between the real interest rate and investment 
C)  the positive relation between the real interest rate and saving 
D)  the negative relation between the real interest rate and saving 
A)  the positive relation between the real interest rate and investment 
B)  the negative relation between the real interest rate and investment 
C)  the positive relation between the real interest rate and saving 
D)  the negative relation between the real interest rate and saving

Question 7

What is the face value of a bond?

Accepted Answer

A)  the market price of the bond 
B)  the difference between the amount owned by the issuer and the market price of the bond 
C)  the amount owed by the issuer 
D)  the interest earned by the owner of the bond 
A)  the market price of the bond 
B)  the difference between the amount owned by the issuer and the market price of the bond 
C)  the amount owed by the issuer 
D)  the interest earned by the owner of the bond

Question 8

Suppose a country has a consumption tax that is similar to a provincial sales tax.If its government eliminates the consumption tax and replaces it with an income tax that includes an income tax on interest from savings,what would most likely happen?

Accepted Answer

A)  Both the interest rate and saving would decrease. 
B)  The interest rate would decrease,and saving would increase. 
C)  The interest rate would increase,and saving would decrease. 
D)  Both the interest rate and saving would increase. 
A)  Both the interest rate and saving would decrease. 
B)  The interest rate would decrease,and saving would increase. 
C)  The interest rate would increase,and saving would decrease. 
D)  Both the interest rate and saving would increase.

Question 9

Your cousin wants to buy either stock or bonds in Holistic Healing Inc.,but he isn't sure which to buy.Explain how each of his quotes below should affect his choice between the stock and the bond.
a."I have reason to believe that the company will be announcing a new holistic remedy that has amazing health benefits."
b."I would like to tell people I am part owner of Holistic Healing Inc."
c."I do not want to take on much risk."

Accepted Answer

a.Presumably,when this happens,unless ev

Question 10

Stock in Synergistic Corporation is selling at $20 per share.It had earnings of $4 a share and a dividend yield of 4 percent.What is the dividend?

Accepted Answer

A)  $0.04 
B)  $0.20 
C)  $1.00 
D)  $120 
A)  $0.04 
B)  $0.20 
C)  $1.00 
D)  $120

Question 11

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

Accepted Answer

A)  Interest rates would rise and savings would fall. 
B)  Both interest rates and savings would rise. 
C)  Both interest rates and savings would fall. 
D)  Interest rates would fall and savings would rise. 
A)  Interest rates would rise and savings would fall. 
B)  Both interest rates and savings would rise. 
C)  Both interest rates and savings would fall. 
D)  Interest rates would fall and savings would rise.

Question 12

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

Accepted Answer

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

Question 13

In a closed economy,investment must be equal to private saving.

Accepted Answer

A) True 
 B)False

Question 14

If the current market interest rate for loanable funds is above the equilibrium level,what would we expect to happen?

Accepted Answer

A)  Because there is a surplus of loanable funds,the interest rate will rise. 
B)  Because there is a shortage of loanable funds,the interest rate will rise. 
C)  Because there is a shortage of loanable funds,the interest rate will fall. 
D)  Because there is a surplus of loanable funds,the interest rate will fall. 
A)  Because there is a surplus of loanable funds,the interest rate will rise. 
B)  Because there is a shortage of loanable funds,the interest rate will rise. 
C)  Because there is a shortage of loanable funds,the interest rate will fall. 
D)  Because there is a surplus of loanable funds,the interest rate will fall.

Question 15

Using a graph representing the market for loanable funds,show and explain what happens to interest rates and investment if a government goes from a deficit to a surplus.

Accepted Answer

As shown in the graph below,the economy

Question 16

What does a high price / earnings ratio indicate?

Accepted Answer

A)  Either the stock is undervalued or people have become more optimistic about the corporation's prospects. 
B)  Either the stock is overvalued or people have become more optimistic about the corporation's prospects. 
C)  Either the stock is overvalued or people have become less optimistic about the corporation's prospects. 
D)  Either the stock is undervalued or people have become less optimistic about the corporation's prospects. 
A)  Either the stock is undervalued or people have become more optimistic about the corporation's prospects. 
B)  Either the stock is overvalued or people have become more optimistic about the corporation's prospects. 
C)  Either the stock is overvalued or people have become less optimistic about the corporation's prospects. 
D)  Either the stock is undervalued or people have become less optimistic about the corporation's prospects.

Question 17

Which term refers to the situation when the tax revenue of the federal government exceeds government spending?

Accepted Answer

A)  budget deficit 
B)  budget surplus 
C)  national debt 
D)  trade deficit 
A)  budget deficit 
B)  budget surplus 
C)  national debt 
D)  trade deficit

Question 18

Suppose that in a closed economy GDP is equal to 12,000,taxes are equal to 1500,consumption is equal to 6800,and government expenditures are equal to 3200.What is national saving?

Accepted Answer

A)  500 
B)  2000 
C)  2700 
D)  4200 
A)  500 
B)  2000 
C)  2700 
D)  4200

Question 19

What do people who buy newly issued stock in a corporation such as Rockwood Pottery Ltd.provide?

Accepted Answer

A)  They buy debt finance and so become part owners of Rockwood. 
B)  They buy debt finance and so become creditors of Rockwood. 
C)  They buy equity finance and so become part owners of Rockwood. 
D)  They buy equity finance and so become creditors of Rockwood. 
A)  They buy debt finance and so become part owners of Rockwood. 
B)  They buy debt finance and so become creditors of Rockwood. 
C)  They buy equity finance and so become part owners of Rockwood. 
D)  They buy equity finance and so become creditors of Rockwood.

Question 20

The only province not currently collecting a sales tax is Alberta.What is a likely result from the recently elected government's proposal to reduce income taxes and introduce a sales tax?

Accepted Answer

A)  The equilibrium interest rate and investment would both increase. 
B)  The supply of loanable funds would shift left 
C)  The standard of living would eventually rise. 
D)  The equilibrium interest rate would decrease and investment would increase. 
A)  The equilibrium interest rate and investment would both increase. 
B)  The supply of loanable funds would shift left 
C)  The standard of living would eventually rise. 
D)  The equilibrium interest rate would decrease and investment would increase.

What would an increase in the budget deficit most likely do to investment spending?

If you know that Alberta Dreams Corporation,a travel equipment and clothing company,has revenues of $30 million and accounting costs of $10 million,you also know that its earnings are $20 million.

What is a bond?

Which term refers to a certificate of indebtedness that specifies the obligations of the borrower to the holder?

What does the slope of the demand for loanable funds curve represent?

What is the face value of a bond?

Suppose a country has a consumption tax that is similar to a provincial sales tax.If its government eliminates the consumption tax and replaces it with an income tax that includes an income tax on interest from savings,what would most likely happen?

Stock in Synergistic Corporation is selling at $20 per share.It had earnings of $4 a share and a dividend yield of 4 percent.What is the dividend?

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

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

In a closed economy,investment must be equal to private saving.

If the current market interest rate for loanable funds is above the equilibrium level,what would we expect to happen?

Using a graph representing the market for loanable funds,show and explain what happens to interest rates and investment if a government goes from a deficit to a surplus.

What does a high price / earnings ratio indicate?

Which term refers to the situation when the tax revenue of the federal government exceeds government spending?

Suppose that in a closed economy GDP is equal to 12,000,taxes are equal to 1500,consumption is equal to 6800,and government expenditures are equal to 3200.What is national saving?

What do people who buy newly issued stock in a corporation such as Rockwood Pottery Ltd.provide?

The only province not currently collecting a sales tax is Alberta.What is a likely result from the recently elected government's proposal to reduce income taxes and introduce a sales tax?

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 would an increase in the budget deficit most likely do to investment spending?

If you know that Alberta Dreams Corporation,a travel equipment and clothing company,has revenues of $30 million and accounting costs of $10 million,you also know that its earnings are $20 million.

What is a bond?

Which term refers to a certificate of indebtedness that specifies the obligations of the borrower to the holder?

What does the slope of the demand for loanable funds curve represent?

What is the face value of a bond?

Suppose a country has a consumption tax that is similar to a provincial sales tax.If its government eliminates the consumption tax and replaces it with an income tax that includes an income tax on interest from savings,what would most likely happen?

Stock in Synergistic Corporation is selling at $20 per share.It had earnings of $4 a share and a dividend yield of 4 percent.What is the dividend?

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

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

In a closed economy,investment must be equal to private saving.

If the current market interest rate for loanable funds is above the equilibrium level,what would we expect to happen?

Using a graph representing the market for loanable funds,show and explain what happens to interest rates and investment if a government goes from a deficit to a surplus.

What does a high price / earnings ratio indicate?

Which term refers to the situation when the tax revenue of the federal government exceeds government spending?

Suppose that in a closed economy GDP is equal to 12,000,taxes are equal to 1500,consumption is equal to 6800,and government expenditures are equal to 3200.What is national saving?

What do people who buy newly issued stock in a corporation such as Rockwood Pottery Ltd.provide?

The only province not currently collecting a sales tax is Alberta.What is a likely result from the recently elected government's proposal to reduce income taxes and introduce a sales tax?

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