Question 1

If Mega Corp. borrows $8,000 and agrees to pay the lender $9,000 in one year, the annual interest rate on the loan is approximately:

Accepted Answer

A) 9.0%. 
B) 10.5%. 
C) 12.5%. 
D) 11.8%. 
A) 9.0%. 
B) 10.5%. 
C) 12.5%. 
D) 11.8%.

Question 2

Use the following to answer questions:
Scenario: Closed Economy S = I
GDP is $12 trillion this year in a closed economy. Consumption is $8 trillion and government spending is $2 trillion. Taxes are $0.5 trillion.
-(Scenario: Closed Economy S = I) Look at the scenario Closed Economy S = I. What is the government budget balance?

Accepted Answer

A) a surplus of $1.5 trillion 
B) a deficit of $1.5 trillion 
C) a surplus of $0.5 trillion 
D) a deficit of $0.5 trillion 
A) a surplus of $1.5 trillion 
B) a deficit of $1.5 trillion 
C) a surplus of $0.5 trillion 
D) a deficit of $0.5 trillion

Question 3

Financial markets make borrowing large amounts of money easier because they simplify negotiation between borrowers and lenders. This is an example of:

Accepted Answer

A) reducing transaction costs. 
B) reducing risk. 
C) providing liquidity. 
D) acting as a lender of last resort. 
A) reducing transaction costs. 
B) reducing risk. 
C) providing liquidity. 
D) acting as a lender of last resort.

Question 4

Use the following to answer questions:
Figure: Loanable Funds Market  
-(Figure: Loanable Funds Market) Look at the figure Loanable Funds Market. The equilibrium interest rate and total quantity of lending are:

Accepted Answer

A) 8% and $2 trillion. 
B) 2% and $5 trillion. 
C) 10% and $1 trillion. 
D) 6% and $3 trillion. 
A) 8% and $2 trillion. 
B) 2% and $5 trillion. 
C) 10% and $1 trillion. 
D) 6% and $3 trillion.

Question 5

There is a negative relationship between the quantity of investment spending and the interest rate.

Accepted Answer

A) True 
 B)False

Question 6

All of the following are examples of financial assets and/or liabilities EXCEPT:

Accepted Answer

A) loans. 
B) stocks and bonds. 
C) real estate. 
D) bank deposits. 
A) loans. 
B) stocks and bonds. 
C) real estate. 
D) bank deposits.

Question 7

A person who is risk averse loses less welfare from losing $100 than he or she gains in welfare from winning $100.

Accepted Answer

A) True 
 B)False

Question 8

The efficient markets hypothesis states that:

Accepted Answer

A) stock prices fluctuate following the path of business cycles. 
B) at any time stock prices are fairly valued, reflecting all available information. 
C) stock prices move irrationally and rather unpredictably. 
D) stock prices are easily manipulated by irrational exuberance. 
A) stock prices fluctuate following the path of business cycles. 
B) at any time stock prices are fairly valued, reflecting all available information. 
C) stock prices move irrationally and rather unpredictably. 
D) stock prices are easily manipulated by irrational exuberance.

Question 9

Which of the following is (are) a source (sources) of funding for private investment spending?
I. savings of the owners of a family business
II. profits of a large corporation
III. borrowing

Accepted Answer

A) I only 
B) II only 
C) III only 
D) I, II, and III 
A) I only 
B) II only 
C) III only 
D) I, II, and III

Question 10

A household's wealth is always equal to its income in the current year.

Accepted Answer

A) True 
 B)False

Question 11

If Debbie gets a loan to remodel her kitchen, the loan is a liability for Debbie and an asset for the bank that issued the loan.

Accepted Answer

A) True 
 B)False

Question 12

In an open economy, savings can come from all of the following EXCEPT:

Accepted Answer

A) domestic sources. 
B) foreign sources. 
C) government sources. 
D) consumption. 
A) domestic sources. 
B) foreign sources. 
C) government sources. 
D) consumption.

Question 13

Use the following to answer questions :
Scenario: Open Economy S = I
In an open economy GDP is $12 trillion this year. Consumption is $8 trillion, and government spending is $2 trillion. Taxes are $0.5 trillion. Exports are $1 trillion, and imports are $3 trillion.
-(Scenario: Open Economy S = I) Look at the scenario Open Economy S = I. What is the government budget balance?

Accepted Answer

A) a surplus of $1.5 trillion 
B) a deficit of $1.5 trillion 
C) a deficit of $0.5 trillion 
D) a surplus of $3.5 trillion 
A) a surplus of $1.5 trillion 
B) a deficit of $1.5 trillion 
C) a deficit of $0.5 trillion 
D) a surplus of $3.5 trillion

Question 14

Assuming a positive interest rate, the dollar amount of a future payment is _____ its present value.

Accepted Answer

A) exactly the same as 
B) approximately the same as 
C) less than 
D) more than 
A) exactly the same as 
B) approximately the same as 
C) less than 
D) more than

Question 15

If Congress passed a law last year that will increase corporate taxes this year, holding other things constant, stock prices will _____ this year.

Accepted Answer

A) increase 
B) decrease 
C) not change 
D) It is impossible to say how stock prices will change. 
A) increase 
B) decrease 
C) not change 
D) It is impossible to say how stock prices will change.

Question 16

You receive an email from a firm proposing the following business deal. The firm will send you $1,000 now, and in exchange you will send it $1,100 in one year. You will just break even if the annual interest rate is:

Accepted Answer

A) 12%. 
B) 4%. 
C) 6%. 
D) 10%. 
A) 12%. 
B) 4%. 
C) 6%. 
D) 10%.

Question 17

In a closed economy, investment spending, I, must equal:

Accepted Answer

A) GDP - C - G. 
B) GDP - C. 
C) GDP - C - G - X. 
D) GDP - [C × G]. 
A) GDP - C - G. 
B) GDP - C. 
C) GDP - C - G - X. 
D) GDP - [C × G].

Question 18

Use the following to answer questions:
Table: Investment Projects  
-(Table: Investment Projects) Look at the table Investment Projects. If the market interest rate is 11%, the last project undertaken is:

Accepted Answer

A) G. 
B) H. 
C) I. 
D) J. 
A) G. 
B) H. 
C) I. 
D) J.

Question 19

National savings is the sum of private savings and:

Accepted Answer

A) private consumption. 
B) government tax revenue. 
C) the budget balance. 
D) trade surplus. 
A) private consumption. 
B) government tax revenue. 
C) the budget balance. 
D) trade surplus.

Question 20

A financial intermediary that sets up a diversified portfolio of stocks and then resells that portfolio to individual investors is known as a:

Accepted Answer

A) life insurance company. 
B) mutual fund. 
C) brokerage company. 
D) credit card company 
A) life insurance company. 
B) mutual fund. 
C) brokerage company. 
D) credit card company

If Mega Corp. borrows $8,000 and agrees to pay the lender $9,000 in one year, the annual interest rate on the loan is approximately:

Financial markets make borrowing large amounts of money easier because they simplify negotiation between borrowers and lenders. This is an example of:

Use the following to answer questions: Figure: Loanable Funds Market -(Figure: Loanable Funds Market) Look at the figure Loanable Funds Market. The equilibrium interest rate and total quantity of lending are:

There is a negative relationship between the quantity of investment spending and the interest rate.

All of the following are examples of financial assets and/or liabilities EXCEPT:

A person who is risk averse loses less welfare from losing $100 than he or she gains in welfare from winning $100.

The efficient markets hypothesis states that:

Which of the following is (are) a source (sources) of funding for private investment spending? I. savings of the owners of a family business II. profits of a large corporation III. borrowing

A household's wealth is always equal to its income in the current year.

If Debbie gets a loan to remodel her kitchen, the loan is a liability for Debbie and an asset for the bank that issued the loan.

In an open economy, savings can come from all of the following EXCEPT:

Assuming a positive interest rate, the dollar amount of a future payment is _____ its present value.

If Congress passed a law last year that will increase corporate taxes this year, holding other things constant, stock prices will _____ this year.

You receive an email from a firm proposing the following business deal. The firm will send you $1,000 now, and in exchange you will send it $1,100 in one year. You will just break even if the annual interest rate is:

In a closed economy, investment spending, I, must equal:

Use the following to answer questions: Table: Investment Projects -(Table: Investment Projects) Look at the table Investment Projects. If the market interest rate is 11%, the last project undertaken is:

National savings is the sum of private savings and:

A financial intermediary that sets up a diversified portfolio of stocks and then resells that portfolio to individual investors is known as a:

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

If Mega Corp. borrows $8,000 and agrees to pay the lender $9,000 in one year, the annual interest rate on the loan is approximately:

Financial markets make borrowing large amounts of money easier because they simplify negotiation between borrowers and lenders. This is an example of:

Use the following to answer questions: Figure: Loanable Funds Market -(Figure: Loanable Funds Market) Look at the figure Loanable Funds Market. The equilibrium interest rate and total quantity of lending are:

There is a negative relationship between the quantity of investment spending and the interest rate.

All of the following are examples of financial assets and/or liabilities EXCEPT:

A person who is risk averse loses less welfare from losing $100 than he or she gains in welfare from winning $100.

The efficient markets hypothesis states that:

Which of the following is (are) a source (sources) of funding for private investment spending? I. savings of the owners of a family business II. profits of a large corporation III. borrowing

A household's wealth is always equal to its income in the current year.

If Debbie gets a loan to remodel her kitchen, the loan is a liability for Debbie and an asset for the bank that issued the loan.

In an open economy, savings can come from all of the following EXCEPT:

Assuming a positive interest rate, the dollar amount of a future payment is _____ its present value.

If Congress passed a law last year that will increase corporate taxes this year, holding other things constant, stock prices will _____ this year.

You receive an email from a firm proposing the following business deal. The firm will send you $1,000 now, and in exchange you will send it $1,100 in one year. You will just break even if the annual interest rate is:

In a closed economy, investment spending, I, must equal:

Use the following to answer questions: Table: Investment Projects -(Table: Investment Projects) Look at the table Investment Projects. If the market interest rate is 11%, the last project undertaken is:

National savings is the sum of private savings and:

A financial intermediary that sets up a diversified portfolio of stocks and then resells that portfolio to individual investors is known as a:

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