Exam 10: Savings, Investment Spending, and the Financial System

Use the following to answer questions : Figure: The Market for Loanable Funds III -(Figure: The Market for Loanable Funds III) Look at the figure The Market for Loanable Funds III. If the government in a closed economy is running a budget balance of zero when it decides to increase defense spending by $200 billion and then finances the spending by selling bonds, the equilibrium interest rate will:

Use the following to answer questions: Table: Investment Projects -(Table: Investment Projects) Look at the table Investment Projects. If the market interest rate is 9%, the amount of planned investment spending is:

Compared to individual loans, loan-backed securities provide _____diversification and _____ liquidity than individual loans.

When households invest their wealth in financial markets, they purchase financial assets.

Which of the following is a function of financial intermediaries?

A relatively low saving rate affects productivity growth by:

Use the following to answer question: -(Table: Loanable Funds) Look at the table Loanable Funds. At what interest rate will the market for loanable funds be in equilibrium?

The financial system contributes to long-run economic growth by channeling funds from savers to businesses for investment spending.

Samantha asks her employer for a 5% raise for the coming year. If the inflation rate during the next year is 5.5%, then her real wage will:

A random walk is:

A business will want to borrow to undertake an investment project when the rate of return on that project is _____ rate.

Privately held companies are owned by an individual or a few partners, who get to keep all of the company's profit.

A business will be likely to borrow to fund projects if:

The efficient markets hypothesis says that asset prices embody all publicly available information.

Most physical capital, except infrastructure, is financed by private investment spending by people and corporations.

The government can increase savings by:

Use the following to answer questions : Figure: The Market for Loanable Funds II -(Figure: The Market for Loanable Funds II) Look at the figure The Market for Loanable Funds II. An increase in savings by the private sector will shift the supply of loanable funds to the_____ and _____ the interest rate.

The United States is a net recipient of foreign savings.

When corporations need to borrow large amounts of money, they can minimize their transaction costs by getting many small loans directly from many people.

Interest rates were high during the middle years of the period from 2002 to 2014 and then decreased primarily because: