Question 1

One advantage of bonds over loans is that:

Accepted Answer

A) interest rates on bonds are generally lower than interest rates on loans. 
B) interest rates on bonds are generally higher than interest rates on loans. 
C) each bond is specifically tailored to meet the needs of the borrower so that no two bonds are alike. 
D) bonds are more standardized than loans. 
A) interest rates on bonds are generally lower than interest rates on loans. 
B) interest rates on bonds are generally higher than interest rates on loans. 
C) each bond is specifically tailored to meet the needs of the borrower so that no two bonds are alike. 
D) bonds are more standardized than loans.

Question 2

In the loanable funds market, savers:

Accepted Answer

A) demand funds. 
B) supply funds. 
C) represent borrowers of funds. 
D) pay the equilibrium interest rate. 
A) demand funds. 
B) supply funds. 
C) represent borrowers of funds. 
D) pay the equilibrium interest rate.

Question 3

All of the following are financial assets EXCEPT:

Accepted Answer

A) bonds. 
B) stocks. 
C) bank deposits. 
D) gold coins. 
A) bonds. 
B) stocks. 
C) bank deposits. 
D) gold coins.

Question 4

A common strategy to reduce the risk of a large financial loss is:

Accepted Answer

A) to buy and sell assets through a mutual fund, since mutual funds cannot lose money. 
B) to diversify financial assets so that their risks of failure are unrelated. 
C) to buy financial assets from developing countries, because the rates of return are very high and safe and their national currencies are much more stable than the U.S. dollar. 
D) to buy real instead of financial assets. 
A) to buy and sell assets through a mutual fund, since mutual funds cannot lose money. 
B) to diversify financial assets so that their risks of failure are unrelated. 
C) to buy financial assets from developing countries, because the rates of return are very high and safe and their national currencies are much more stable than the U.S. dollar. 
D) to buy real instead of financial assets.

Question 5

Which of the following financial assets is likely to be the MOST liquid?

Accepted Answer

A) stocks 
B) bonds 
C) mutual funds shares 
D) bank demand deposits 
A) stocks 
B) bonds 
C) mutual funds shares 
D) bank demand deposits

Question 6

Since money from both domestic and foreign savers must eventually be repaid with interest, capital inflow has the same effect on the national economy as national savings.

Accepted Answer

A) True 
 B)False

Question 7

When a corporation borrows money from lenders in exchange for a fixed rate of return and a given maturity, the corporation is:

Accepted Answer

A) taking out a loan. 
B) issuing bonds. 
C) issuing stocks. 
D) liquidating a bank deposit. 
A) taking out a loan. 
B) issuing bonds. 
C) issuing stocks. 
D) liquidating a bank deposit.

Question 8

The savings-investment spending identity says that savings and investment spending are always equal for the economy as a whole.

Accepted Answer

A) True 
 B)False

Question 9

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 government borrowing will shift the demand for loanable funds to the _____ and _____ the interest rate.

Accepted Answer

A) left; increase 
B) right; decrease 
C) right; increase 
D) left; decrease 
A) left; increase 
B) right; decrease 
C) right; increase 
D) left; decrease

Question 10

Financial markets:

Accepted Answer

A) increase transaction costs. 
B) reduce diversification. 
C) provide liquidity. 
D) determine tax rates. 
A) increase transaction costs. 
B) reduce diversification. 
C) provide liquidity. 
D) determine tax rates.

Question 11

In an open economy, total investment equals:

Accepted Answer

A) national savings plus capital inflow. 
B) private savings plus national savings plus capital inflow. 
C) private savings plus capital inflow. 
D) national savings minus private savings minus capital inflow. 
A) national savings plus capital inflow. 
B) private savings plus national savings plus capital inflow. 
C) private savings plus capital inflow. 
D) national savings minus private savings minus capital inflow.

Question 12

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

Accepted Answer

A) $15.9 trillion. 
B) $4.9 trillion. 
C) $2.1 trillion. 
D) $1.6 trillion. 
A) $15.9 trillion. 
B) $4.9 trillion. 
C) $2.1 trillion. 
D) $1.6 trillion.

Question 13

Income to the owners of commercial real estate is in the form of:

Accepted Answer

A) interest. 
B) dividends 
C) transfer payments. 
D) rent and profit from selling the property at a price higher than its purchase price. 
A) interest. 
B) dividends 
C) transfer payments. 
D) rent and profit from selling the property at a price higher than its purchase price.

Question 14

In the loanable funds market, borrowers:

Accepted Answer

A) are best represented by the supply of loanable funds. 
B) are not affected by changes in the inflation rate. 
C) are best represented by the demand for loanable funds. 
D) lose money to unexpected increases in the inflation rate. 
A) are best represented by the supply of loanable funds. 
B) are not affected by changes in the inflation rate. 
C) are best represented by the demand for loanable funds. 
D) lose money to unexpected increases in the inflation rate.

Question 15

Expectations of an improving economy will generally cause an increase in investment by shifting the loanable funds demand curve to the right.

Accepted Answer

A) True 
 B)False

Question 16

The budget balance equals:

Accepted Answer

A) taxes minus government spending. 
B) taxes plus government spending. 
C) GDP minus consumption and government spending. 
D) GDP plus taxes. 
A) taxes minus government spending. 
B) taxes plus government spending. 
C) GDP minus consumption and government spending. 
D) GDP plus taxes.

Question 17

Bonds are less risky than stocks because a company legally must pay what it owes to lenders before it can distribute profits to stockholders.

Accepted Answer

A) True 
 B)False

Question 18

Changes in the prices of stock are the result of changes in the supply and demand for stocks of investors.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following is the most accurate statement?

Accepted Answer

A) Deficits increase economic growth. 
B) Deficits decrease economic growth. 
C) Deficits do not affect economic growth. 
D) We cannot unambiguously say whether government spending that increases deficits lowers or increases economic growth. 
A) Deficits increase economic growth. 
B) Deficits decrease economic growth. 
C) Deficits do not affect economic growth. 
D) We cannot unambiguously say whether government spending that increases deficits lowers or increases economic growth.

Question 20

When a corporation borrows money from a bank in exchange for a contract to repay it on a schedule, the corporation is:

Accepted Answer

A) taking out a loan. 
B) issuing bonds. 
C) issuing stocks. 
D) liquidating a bank deposit. 
A) taking out a loan. 
B) issuing bonds. 
C) issuing stocks. 
D) liquidating a bank deposit.

One advantage of bonds over loans is that:

In the loanable funds market, savers:

All of the following are financial assets EXCEPT:

A common strategy to reduce the risk of a large financial loss is:

Which of the following financial assets is likely to be the MOST liquid?

Since money from both domestic and foreign savers must eventually be repaid with interest, capital inflow has the same effect on the national economy as national savings.

When a corporation borrows money from lenders in exchange for a fixed rate of return and a given maturity, the corporation is:

The savings-investment spending identity says that savings and investment spending are always equal for the economy as a whole.

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 government borrowing will shift the demand for loanable funds to the _ and _ the interest rate.

Financial markets:

In an open economy, total investment equals:

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

Income to the owners of commercial real estate is in the form of:

In the loanable funds market, borrowers:

Expectations of an improving economy will generally cause an increase in investment by shifting the loanable funds demand curve to the right.

The budget balance equals:

Bonds are less risky than stocks because a company legally must pay what it owes to lenders before it can distribute profits to stockholders.

Changes in the prices of stock are the result of changes in the supply and demand for stocks of investors.

Which of the following is the most accurate statement?

When a corporation borrows money from a bank in exchange for a contract to repay it on a schedule, the corporation is:

First Principles

Economic Models

Supply and Demand

International Trade 5

Macroeconomics: the Big Picture

Gdp and Cpi: Tracking the Macroeconomy

Unemployment and Inflation

Long-Run Economic Growth

Fiscal Policy Appendix Taxes and the Multiplier

Money, Banking, and the Federal Reserve System

Monetary Policy

Inflation, Disinflation, and Deflation

Crises and Consequences

Events and Ideas

Open-Economy Macroeconomics

Graphs in Economics

toward a Fuller Understanding of Present Value

Filters

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

One advantage of bonds over loans is that:

In the loanable funds market, savers:

All of the following are financial assets EXCEPT:

A common strategy to reduce the risk of a large financial loss is:

Which of the following financial assets is likely to be the MOST liquid?

Since money from both domestic and foreign savers must eventually be repaid with interest, capital inflow has the same effect on the national economy as national savings.

When a corporation borrows money from lenders in exchange for a fixed rate of return and a given maturity, the corporation is:

The savings-investment spending identity says that savings and investment spending are always equal for the economy as a whole.

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 government borrowing will shift the demand for loanable funds to the _____ and _____ the interest rate.

Financial markets:

In an open economy, total investment equals:

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

Income to the owners of commercial real estate is in the form of:

In the loanable funds market, borrowers:

Expectations of an improving economy will generally cause an increase in investment by shifting the loanable funds demand curve to the right.

The budget balance equals:

Bonds are less risky than stocks because a company legally must pay what it owes to lenders before it can distribute profits to stockholders.

Changes in the prices of stock are the result of changes in the supply and demand for stocks of investors.

Which of the following is the most accurate statement?

When a corporation borrows money from a bank in exchange for a contract to repay it on a schedule, the corporation is:

First Principles

Economic Models

Supply and Demand

International Trade 5

Macroeconomics: the Big Picture

Gdp and Cpi: Tracking the Macroeconomy

Unemployment and Inflation

Long-Run Economic Growth

Fiscal Policy Appendix Taxes and the Multiplier

Money, Banking, and the Federal Reserve System

Monetary Policy

Inflation, Disinflation, and Deflation

Crises and Consequences

Events and Ideas

Open-Economy Macroeconomics

Graphs in Economics

toward a Fuller Understanding of Present Value

Filters

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 government borrowing will shift the demand for loanable funds to the _ and _ the interest rate.