Question 1

The sources of financing of physical capital include:

Accepted Answer

A) domestic consumption. 
B) foreign borrowing from the home country. 
C) foreign investment in the home country. 
D) domestic consumption, foreign borrowing from the home country, and foreign investment in the home country. 
A) domestic consumption. 
B) foreign borrowing from the home country. 
C) foreign investment in the home country. 
D) domestic consumption, foreign borrowing from the home country, and foreign investment in the home country.

Question 2

Use the following to answer questions:
Table: Investment Projects  
-(Table: Investment Projects) Look at the table Investment Projects. If the market interest rate is 13%, the amount of planned investment spending is:

Accepted Answer

A) $200. 
B) $800. 
C) $1,000. 
D) $2,000. 
A) $200. 
B) $800. 
C) $1,000. 
D) $2,000.

Question 3

The present value of $1 realized one year from now equals:

Accepted Answer

A) $1 / (1 + r). 
B) $1 × (1 + r). 
C) 1 + r. 
D) 1 / r. 
A) $1 / (1 + r). 
B) $1 × (1 + r). 
C) 1 + r. 
D) 1 / r.

Question 4

Bonds with a high risk of default usually:

Accepted Answer

A) have a longer maturity than bonds with a low risk of default. 
B) have a shorter maturity than bonds with a low risk of default. 
C) have to pay a high rate of interest to attract investors. 
D) can pay a low rate of interest and still attract investors. 
A) have a longer maturity than bonds with a low risk of default. 
B) have a shorter maturity than bonds with a low risk of default. 
C) have to pay a high rate of interest to attract investors. 
D) can pay a low rate of interest and still attract investors.

Question 5

The purchaser of a share of stock receives interest each year from the stock and then receives the purchase price of the stock at its maturity.

Accepted Answer

A) True 
 B)False

Question 6

A liability is:

Accepted Answer

A) having wronged someone and being held responsible in court. 
B) a requirement to pay in the future. 
C) inability to perform an agreed task. 
D) the requirement that banks offer insurance to depositors. 
A) having wronged someone and being held responsible in court. 
B) a requirement to pay in the future. 
C) inability to perform an agreed task. 
D) the requirement that banks offer insurance to depositors.

Question 7

To help increase investment spending, the government can:

Accepted Answer

A) lower taxes on consumption, so that disposable income rises. 
B) lower taxes on the returns from savings, so that total savings increase and the interest rate falls. 
C) raise taxes on the returns from bonds while lowering taxes on stock dividends. 
D) lower taxes on investment spending while raising taxes on savings, so that total tax revenue remains constant. 
A) lower taxes on consumption, so that disposable income rises. 
B) lower taxes on the returns from savings, so that total savings increase and the interest rate falls. 
C) raise taxes on the returns from bonds while lowering taxes on stock dividends. 
D) lower taxes on investment spending while raising taxes on savings, so that total tax revenue remains constant.

Question 8

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 4% and a new equilibrium quantity of loanable funds of $75 billion?

Accepted Answer

A) Profit expectations for business investments become less optimistic. 
B) Capital inflows from foreign citizens decline. 
C) The federal government runs a budget deficit rather than a surplus. 
D) The government eliminates taxes on income from interest earned. 
A) Profit expectations for business investments become less optimistic. 
B) Capital inflows from foreign citizens decline. 
C) The federal government runs a budget deficit rather than a surplus. 
D) The government eliminates taxes on income from interest earned.

Question 9

Domestic savings and foreign savings are:

Accepted Answer

A) sources of funds for investment spending. 
B) equal in terms of the composition of total savings. 
C) used for investment spending only when there is unplanned investment spending. 
D) not necessary for investment spending, since government funds this spending. 
A) sources of funds for investment spending. 
B) equal in terms of the composition of total savings. 
C) used for investment spending only when there is unplanned investment spending. 
D) not necessary for investment spending, since government funds this spending.

Question 10

According to the savings-investment spending identity:

Accepted Answer

A) savings and investment spending are always equal for the economy as a whole. 
B) for long-run economic growth savings must be more than investment spending. 
C) for long-run economic growth savings must be less than investment spending. 
D) the identity of savers and investors is important for encouraging long-run economic growth. 
A) savings and investment spending are always equal for the economy as a whole. 
B) for long-run economic growth savings must be more than investment spending. 
C) for long-run economic growth savings must be less than investment spending. 
D) the identity of savers and investors is important for encouraging long-run economic growth.

Question 11

If you are paid $10,500 in one year on a $10,000 loan made today, then your annual interest rate is:

Accepted Answer

A) 0.5%. 
B) 5%. 
C) 10%. 
D) 10.5%. 
A) 0.5%. 
B) 5%. 
C) 10%. 
D) 10.5%.

Question 12

Investment spending in macroeconomics refers to:

Accepted Answer

A) buying stocks. 
B) buying newly issued shares of stock. 
C) adding to physical capital. 
D) adding to one's retirement account. 
A) buying stocks. 
B) buying newly issued shares of stock. 
C) adding to physical capital. 
D) adding to one's retirement account.

Question 13

Which of the following is (are) source(s) of funds for Facebook's investment spending?
I. investors who purchase shares of stock in the company
II. borrowing from savers

Accepted Answer

A) I only 
B) II only 
C) both I and II 
D) neither I nor II 
A) I only 
B) II only 
C) both I and II 
D) neither I nor II

Question 14

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. Other things being equal, if there is an increase in the interest rate above 8%, _____ quantity of loanable funds will be demanded.

Accepted Answer

A) the same 
B) a larger 
C) a smaller 
D) at first a smaller and then a larger 
A) the same 
B) a larger 
C) a smaller 
D) at first a smaller and then a larger

Question 15

A bubble is a large decrease in asset prices caused by unrealistic expectations about future prices.

Accepted Answer

A) True 
 B)False

Question 16

Use the following to answer question :
Figure: Demand for Loanable Funds  
-(Figure: Demand for Loanable Funds) Look at the figure Demand for Loanable Funds. When the interest rate is 6%, the quantity demanded of loanable funds will equal:

Accepted Answer

A) $30 billion. 
B) $40 billion. 
C) $50 billion. 
D) $60 billion. 
A) $30 billion. 
B) $40 billion. 
C) $50 billion. 
D) $60 billion.

Question 17

All of the following scenarios are associated with government budget deficits EXCEPT that:

Accepted Answer

A) the government becomes a borrower in the market for loanable funds. 
B) the interest rate rises. 
C) the total amount of borrowing decreases. 
D) private investment spending is crowded out. 
A) the government becomes a borrower in the market for loanable funds. 
B) the interest rate rises. 
C) the total amount of borrowing decreases. 
D) private investment spending is crowded out.

Question 18

Borrowers who cannot be served by the stock and bond markets:

Accepted Answer

A) can use banks for their financing needs. 
B) can use the government for their financing needs. 
C) are crowded out of the market. 
D) must hold all of their assets in liquid form. 
A) can use banks for their financing needs. 
B) can use the government for their financing needs. 
C) are crowded out of the market. 
D) must hold all of their assets in liquid form.

Question 19

The savings-investment spending identity says that:

Accepted Answer

A) each person in the economy must invest as much as he or she saves. 
B) savings and investment spending are always equal for the economy as a whole. 
C) savings must equal government investment for the economy as a whole. 
D) each person in the economy must save as much as he or she invests. 
A) each person in the economy must invest as much as he or she saves. 
B) savings and investment spending are always equal for the economy as a whole. 
C) savings must equal government investment for the economy as a whole. 
D) each person in the economy must save as much as he or she invests.

Question 20

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 $150 billion?

Accepted Answer

A) Consumption as a fraction of disposable income increases. 
B) Businesses become more optimistic about the return on investment spending. 
C) The federal government has a budget surplus rather than a budget deficit. 
D) There is an increase in capital inflows from other nations. 
A) Consumption as a fraction of disposable income increases. 
B) Businesses become more optimistic about the return on investment spending. 
C) The federal government has a budget surplus rather than a budget deficit. 
D) There is an increase in capital inflows from other nations.

The sources of financing of physical capital include:

Use the following to answer questions: Table: Investment Projects -(Table: Investment Projects) Look at the table Investment Projects. If the market interest rate is 13%, the amount of planned investment spending is:

The present value of $1 realized one year from now equals:

Bonds with a high risk of default usually:

The purchaser of a share of stock receives interest each year from the stock and then receives the purchase price of the stock at its maturity.

A liability is:

To help increase investment spending, the government can:

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 4% and a new equilibrium quantity of loanable funds of $75 billion?

Domestic savings and foreign savings are:

According to the savings-investment spending identity:

If you are paid $10,500 in one year on a $10,000 loan made today, then your annual interest rate is:

Investment spending in macroeconomics refers to:

Which of the following is (are) source(s) of funds for Facebook's investment spending? I. investors who purchase shares of stock in the company II. borrowing from savers

A bubble is a large decrease in asset prices caused by unrealistic expectations about future prices.

Use the following to answer question : Figure: Demand for Loanable Funds -(Figure: Demand for Loanable Funds) Look at the figure Demand for Loanable Funds. When the interest rate is 6%, the quantity demanded of loanable funds will equal:

All of the following scenarios are associated with government budget deficits EXCEPT that:

Borrowers who cannot be served by the stock and bond markets:

The savings-investment spending identity says that:

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 $150 billion?

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

The sources of financing of physical capital include:

Use the following to answer questions: Table: Investment Projects -(Table: Investment Projects) Look at the table Investment Projects. If the market interest rate is 13%, the amount of planned investment spending is:

The present value of $1 realized one year from now equals:

Bonds with a high risk of default usually:

The purchaser of a share of stock receives interest each year from the stock and then receives the purchase price of the stock at its maturity.

A liability is:

To help increase investment spending, the government can:

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 4% and a new equilibrium quantity of loanable funds of $75 billion?

Domestic savings and foreign savings are:

According to the savings-investment spending identity:

If you are paid $10,500 in one year on a $10,000 loan made today, then your annual interest rate is:

Investment spending in macroeconomics refers to:

Which of the following is (are) source(s) of funds for Facebook's investment spending? I. investors who purchase shares of stock in the company II. borrowing from savers

A bubble is a large decrease in asset prices caused by unrealistic expectations about future prices.

Use the following to answer question : Figure: Demand for Loanable Funds -(Figure: Demand for Loanable Funds) Look at the figure Demand for Loanable Funds. When the interest rate is 6%, the quantity demanded of loanable funds will equal:

All of the following scenarios are associated with government budget deficits EXCEPT that:

Borrowers who cannot be served by the stock and bond markets:

The savings-investment spending identity says that:

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 $150 billion?

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