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

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In an open economy government spending was $30 billion, consumption was $70 billion, taxes were $20 billion, GDP was $100 billion, and investment spending was $10 billion. As a result, there was:

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The demand for stocks:

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An increase in the level of business opportunity will generally _____ the loanable funds demand curve.

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Use the following to answer questions: Figure: Loanable Funds Use the following to answer questions: Figure: Loanable Funds   -(Figure: Loanable Funds) Look at the figure Loanable Funds. Which of the following might produce a new equilibrium interest rate of 8% and a new equilibrium quantity of loanable funds of $75 billion? -(Figure: Loanable Funds) Look at the figure Loanable Funds. Which of the following might produce a new equilibrium interest rate of 8% and a new equilibrium quantity of loanable funds of $75 billion?

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Which of the following is considered to be investing in a physical asset?

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Suppose an investment project is projected to provide $200,000 in revenues. The investment will cost the company $180,000. Given this information, one should commit to the project:

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Use the following to answer questions : Table: National Income Accounts Use the following to answer questions : Table: National Income Accounts    -(Table: National Income Accounts) Look at the table National Income Accounts. The value of tax revenue is: -(Table: National Income Accounts) Look at the table National Income Accounts. The value of tax revenue is:

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Which of the following assets is the LEAST liquid?

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A risk-averse person:

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Compared to bonds, stocks generally provide a _____ return and carry a _____ financial risk.

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

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Interest rates decreased during the 1980s because expectations of future inflation were lower.

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There is a _____ relationship between the amount of loanable funds demanded and the rate of interest.

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Which of the following is (are) an advantage(s) of stock? I. reduction of risk for the owners of the company II. increased welfare for investors who buy the stocks

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In an open economy:

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Diversification in investment is achieved when:

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When a bond becomes more attractive as an asset because of a rise in the interest rate:

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If Mega Corp. borrows $9,000 and agrees to pay the lender $10,500 in one year, the annual interest rate on this loan is approximately:

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Use the following to answer questions : Scenario: A Small Economy Suppose there is no trade and no government in a small economy. GDP is $25 trillion, and consumption spending is $18 trillion this year. -(Scenario: A Small Economy) Look at the scenario A Small Economy. There is a new government, and it imposes taxes on its citizens to spend on infrastructure. Taxes and government spending are both $2 trillion. What is the level of private saving now?

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If the government increases its borrowing, then at every interest rate there is a(n):

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