Question 1

Which of the following is a financial intermediary?

Accepted Answer

A)  a mutual fund 
B)  the stock market 
C)  a Canadian government bond 
D)  a stock exchange company 
A)  a mutual fund 
B)  the stock market 
C)  a Canadian government bond 
D)  a stock exchange company

Question 2

If the current market interest rate for loanable funds is above the equilibrium level,what will most likely happen?

Accepted Answer

A)  The quantity of loanable funds demanded will exceed the quantity of loanable funds supplied and the interest rate will rise. 
B)  The quantity of loanable funds supplied will exceed the quantity of loanable funds demanded and the interest rate will rise. 
C)  The quantity of loanable funds demanded will exceed the quantity of loanable funds supplied and the interest rate will fall. 
D)  The quantity of loanable funds supplied will exceed the quantity of loanable funds demanded and the interest rate will fall. 
A)  The quantity of loanable funds demanded will exceed the quantity of loanable funds supplied and the interest rate will rise. 
B)  The quantity of loanable funds supplied will exceed the quantity of loanable funds demanded and the interest rate will rise. 
C)  The quantity of loanable funds demanded will exceed the quantity of loanable funds supplied and the interest rate will fall. 
D)  The quantity of loanable funds supplied will exceed the quantity of loanable funds demanded and the interest rate will fall.

Question 3

Suppose that in a closed economy GDP is equal to 15,000,taxes are equal to 2500,consumption is equal to 7500,and government expenditures are equal to 3100.What is public saving?

Accepted Answer

A)  -600 
B)  -500 
C)  500 
D)  600 
A)  -600 
B)  -500 
C)  500 
D)  600

Question 4

Suppose that the government were to replace the income tax with a consumption tax.What would happen to the interest rate and investment,respectively?

Accepted Answer

A)  increase and increase 
B)  decrease and decrease 
C)  increase and decrease 
D)  decrease and increase 
A)  increase and increase 
B)  decrease and decrease 
C)  increase and decrease 
D)  decrease and increase

Question 5

What happens when a person buys shares in a mutual fund?

Accepted Answer

A)  The person indirectly becomes owner or creditor to many companies. 
B)  The person lends to and borrows from the other shareholders in the mutual fund. 
C)  The person receives a fixed interest as long as he or she does not sell the shares. 
D)  The person lends money to the federal government. 
A)  The person indirectly becomes owner or creditor to many companies. 
B)  The person lends to and borrows from the other shareholders in the mutual fund. 
C)  The person receives a fixed interest as long as he or she does not sell the shares. 
D)  The person lends money to the federal government.

Question 6

Which of the two bonds in each example would you expect to pay the higher interest rate? Explain why.
a.a Canadian government bond or a bond issued by the government of Turkey
b.a government of Canada bond or a municipal bond of the same face value and term
c.a 6-month Treasury bill or a 20-year bond
d.a Canadian National Railway Company bond or a bond issued by a new fitness clothing company

Accepted Answer

a.The Turkish government bond would like

Question 7

Bella Roma Italian Market sells common stock.What type of financing are they using?

Accepted Answer

A)  They are using equity financing,and the return shareholders earn is fixed. 
B)  They are using equity financing,and the return shareholders earn depends on how profitable the company is. 
C)  They are using debt financing,and the return debt holders earn is fixed. 
D)  They are using debt financing,and the return debt holders earn depends on how profitable the company is. 
A)  They are using equity financing,and the return shareholders earn is fixed. 
B)  They are using equity financing,and the return shareholders earn depends on how profitable the company is. 
C)  They are using debt financing,and the return debt holders earn is fixed. 
D)  They are using debt financing,and the return debt holders earn depends on how profitable the company is.

Question 8

Which statement best describes the pattern in the returns of index funds?

Accepted Answer

A)  They typically have about the same rate of return as more actively managed funds. 
B)  They typically have lower rates of return than more actively managed funds. 
C)  There is no pattern; they may have either higher or lower rates than more actively managed funds. 
D)  They typically have higher rates of return than more actively managed funds. 
A)  They typically have about the same rate of return as more actively managed funds. 
B)  They typically have lower rates of return than more actively managed funds. 
C)  There is no pattern; they may have either higher or lower rates than more actively managed funds. 
D)  They typically have higher rates of return than more actively managed funds.

Question 9

If Parliament reduced the tax rate on interest income,what would most likely happen to investment and saving?

Accepted Answer

A)  Investment would increase,and saving would decrease. 
B)  Investment would decrease,and saving would increase. 
C)  Investment and saving would both increase. 
D)  Investment and saving would both decrease. 
A)  Investment would increase,and saving would decrease. 
B)  Investment would decrease,and saving would increase. 
C)  Investment and saving would both increase. 
D)  Investment and saving would both decrease.

Question 10

Table 8-1
The following table shows stock prices and volumes for a few hypothetical companies.  
-Refer to Table 8-1.In dollar terms,which company paid the highest dividend per share?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  D 
A)  A 
B)  B 
C)  C 
D)  D

Question 11

Which of the following most likely determines the price of stocks traded on exchanges?

Accepted Answer

A)  the Corporate Securities Commission 
B)  the supply and demand for goods and services 
C)  the supply and demand for the stock 
D)  the Toronto Stock Exchange 
A)  the Corporate Securities Commission 
B)  the supply and demand for goods and services 
C)  the supply and demand for the stock 
D)  the Toronto Stock Exchange

Question 12

If people become less optimistic about the future earnings of Hyde Park Records Corporation,the price of stock in the company will fall.

Accepted Answer

A) True 
 B)False

Question 13

Suppose that in a closed economy GDP is equal to 11,000,taxes are equal to 3500,consumption is equal to 6500,and government expenditures are equal to 2000.What is private saving?

Accepted Answer

A)  0 
B)  500 
C)  1000 
D)  1500 
A)  0 
B)  500 
C)  1000 
D)  1500

Question 14

Which of the following is a Canadian stock market index?

Accepted Answer

A)  S&P 100 
B)  S&P 500 
C)  S&P / TSX 
D)  S&P / CAD 
A)  S&P 100 
B)  S&P 500 
C)  S&P / TSX 
D)  S&P / CAD

Question 15

Sylvia is interested only in the rate of interest and is willing to take a great deal of risk in exchange for a high return.Which bond should she look for?

Accepted Answer

A)  federal bonds with short terms 
B)  territorial bonds with long terms 
C)  corporate bonds with short terms 
D)  corporate bonds with long terms 
A)  federal bonds with short terms 
B)  territorial bonds with long terms 
C)  corporate bonds with short terms 
D)  corporate bonds with long terms

Question 16

Suppose Parliament instituted an investment tax credit.What would most likely happen in the market for loanable funds?

Accepted Answer

A)  The interest rate and investment would both fall. 
B)  The interest rate and investment would both rise. 
C)  The interest rate would rise,and investment would fall. 
D)  The interest rate would fall,and investment would rise. 
A)  The interest rate and investment would both fall. 
B)  The interest rate and investment would both rise. 
C)  The interest rate would rise,and investment would fall. 
D)  The interest rate would fall,and investment would rise.

Question 17

The country of Meritor uses the merit as its currency.Recent national income statistics shows that it has GDP of 700 million merits,no government transfer payments,taxes of 210 million merits,a budget surplus of 60 million merits,and investment of 200 million merits.What is the sum of its consumption and government expenditures?

Accepted Answer

A)  470 million merits 
B)  490 million merits 
C)  500 million merits 
D)  560 million merits 
A)  470 million merits 
B)  490 million merits 
C)  500 million merits 
D)  560 million merits

Question 18

In a closed economy,how does national saving compare with investment?

Accepted Answer

A)  National saving is usually greater than investment. 
B)  National saving is equal to investment. 
C)  National saving is usually less than investment because of the leakage of taxes. 
D)  National saving is usually less than investment. 
A)  National saving is usually greater than investment. 
B)  National saving is equal to investment. 
C)  National saving is usually less than investment because of the leakage of taxes. 
D)  National saving is usually less than investment.

Question 19

Which statement best defines a mutual fund?

Accepted Answer

A)  It is a financial market where small firms agree to sell stocks and bonds to raise funds. 
B)  It is a fund set aside by a local government to lend to small firms who want to invest in projects that are beneficial to the firm and community. 
C)  It is an institution that sells stocks and bonds on behalf of small and less known firms who would otherwise have to pay high interest to obtain credit. 
D)  It is an institution that sells shares to the public and uses the proceeds to buy a selection of various types of stocks and bonds. 
A)  It is a financial market where small firms agree to sell stocks and bonds to raise funds. 
B)  It is a fund set aside by a local government to lend to small firms who want to invest in projects that are beneficial to the firm and community. 
C)  It is an institution that sells stocks and bonds on behalf of small and less known firms who would otherwise have to pay high interest to obtain credit. 
D)  It is an institution that sells shares to the public and uses the proceeds to buy a selection of various types of stocks and bonds.

Question 20

Which bond would you expect to pay the highest interest rate?

Accepted Answer

A)  a bond issued by the federal government 
B)  a bond issued by CN Railway 
C)  a bond issued by Manitoba 
D)  a bond issued by a new clothing chain 
A)  a bond issued by the federal government 
B)  a bond issued by CN Railway 
C)  a bond issued by Manitoba 
D)  a bond issued by a new clothing chain

Which of the following is a financial intermediary?

If the current market interest rate for loanable funds is above the equilibrium level,what will most likely happen?

Suppose that in a closed economy GDP is equal to 15,000,taxes are equal to 2500,consumption is equal to 7500,and government expenditures are equal to 3100.What is public saving?

Suppose that the government were to replace the income tax with a consumption tax.What would happen to the interest rate and investment,respectively?

What happens when a person buys shares in a mutual fund?

Bella Roma Italian Market sells common stock.What type of financing are they using?

Which statement best describes the pattern in the returns of index funds?

If Parliament reduced the tax rate on interest income,what would most likely happen to investment and saving?

Table 8-1 The following table shows stock prices and volumes for a few hypothetical companies. -Refer to Table 8-1.In dollar terms,which company paid the highest dividend per share?

Which of the following most likely determines the price of stocks traded on exchanges?

If people become less optimistic about the future earnings of Hyde Park Records Corporation,the price of stock in the company will fall.

Suppose that in a closed economy GDP is equal to 11,000,taxes are equal to 3500,consumption is equal to 6500,and government expenditures are equal to 2000.What is private saving?

Which of the following is a Canadian stock market index?

Sylvia is interested only in the rate of interest and is willing to take a great deal of risk in exchange for a high return.Which bond should she look for?

Suppose Parliament instituted an investment tax credit.What would most likely happen in the market for loanable funds?

In a closed economy,how does national saving compare with investment?

Which statement best defines a mutual fund?

Which bond would you expect to pay the highest interest rate?

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

Which of the following is a financial intermediary?

If the current market interest rate for loanable funds is above the equilibrium level,what will most likely happen?

Suppose that in a closed economy GDP is equal to 15,000,taxes are equal to 2500,consumption is equal to 7500,and government expenditures are equal to 3100.What is public saving?

Suppose that the government were to replace the income tax with a consumption tax.What would happen to the interest rate and investment,respectively?

What happens when a person buys shares in a mutual fund?

Bella Roma Italian Market sells common stock.What type of financing are they using?

Which statement best describes the pattern in the returns of index funds?

If Parliament reduced the tax rate on interest income,what would most likely happen to investment and saving?

Table 8-1 The following table shows stock prices and volumes for a few hypothetical companies. -Refer to Table 8-1.In dollar terms,which company paid the highest dividend per share?

Which of the following most likely determines the price of stocks traded on exchanges?

If people become less optimistic about the future earnings of Hyde Park Records Corporation,the price of stock in the company will fall.

Suppose that in a closed economy GDP is equal to 11,000,taxes are equal to 3500,consumption is equal to 6500,and government expenditures are equal to 2000.What is private saving?

Which of the following is a Canadian stock market index?

Sylvia is interested only in the rate of interest and is willing to take a great deal of risk in exchange for a high return.Which bond should she look for?

Suppose Parliament instituted an investment tax credit.What would most likely happen in the market for loanable funds?

In a closed economy,how does national saving compare with investment?

Which statement best defines a mutual fund?

Which bond would you expect to pay the highest interest rate?

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