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

Of all types of financial assets, transactions costs are likely to be the lowest for loans.

A checking account with $500 is:

Suppose a lender expects a real interest rate of 6% and the inflation rate is expected to be 3%. In this case, the nominal interest rate equals:

A _____ sells policies to savers and guarantees a payment to the policyholder's beneficiaries when the policyholder dies.

If a one-year project costs $100,000 and is expected to return the firm $105,000, the rate of return of the project is:

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 government will crowd out a maximum of _____ in private investment spending.

If a country has a trade surplus, we can conclude that it also has:

Physical capital is purchased through investment spending, which in turn is mostly financed out of:

Most physical capital, except for infrastructure, is provided by: I. governments through public education II. investment spending by private sector firms

Investment spending is undertaken when the rate of return is:

To reduce risk through diversification, a person must invest in several assets with related, or dependent, risk of loss.

When interest rates increase, the demand for commercial and residential real estate will _____ and the price of real estate will _____.

You have an opportunity to pay $1,000 today and receive $1,200 a year from now. If the annual interest rate is 20%, the difference between the present value of the benefit and your investment is:

Transactions costs are likely to be the highest for:

Holding everything else constant, when the government uses an expansionary policy in the presence of a deficit, it will result in:

Capital inflow equals:

Fundamentals are the underlying determinants of a company's future profits.

Linking savers and investors is an important aspect of:

In a closed economy, all investment spending must come from:

Suppose the federal government has a budget deficit and the economy is closed. Using the savings-investment spending identity, explain how this affects investment spending.