Question 1

The present value of $1 to be paid 10 years in the future will increase with the interest rate.

Accepted Answer

A) True 
 B)False

Question 2

Although loan-backed securities provide more diversification than individual loans, they are much less liquid than individual loans.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following is a tangible object that can be used to generate future income?
I. a financial asset
II. a physical asset
III. a liability

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 4

You are choosing whether to purchase a bond or stock. If you purchase the bond, you are likely to receive a _____ return in exchange for a _____ level of risk.

Accepted Answer

A) higher; higher 
B) lower; lower 
C) lower; higher 
D) higher; lower 
A) higher; higher 
B) lower; lower 
C) lower; higher 
D) higher; lower

Question 5

A physical asset is:

Accepted Answer

A) a tangible asset that can be used to generate income and whose owner has the right to dispose of it at will. 
B) a paper claim that entitles the owner to future income from the seller. 
C) the value of accumulated savings. 
D) human capital. 
A) a tangible asset that can be used to generate income and whose owner has the right to dispose of it at will. 
B) a paper claim that entitles the owner to future income from the seller. 
C) the value of accumulated savings. 
D) human capital.

Question 6

If in an open economy a country imports more than it exports and the government budget deficit increases, interest rates will _____ and the amount of borrowing will _____.

Accepted Answer

A) increase; increase 
B) decrease; increase 
C) increase; change unpredictably 
D) change unpredictably; increase 
A) increase; increase 
B) decrease; increase 
C) increase; change unpredictably 
D) change unpredictably; increase

Question 7

The present value of future payments depends on:

Accepted Answer

A) whether the payment is interest or dividends. 
B) the marginal propensity to save. 
C) the interest rate. 
D) sunk costs. 
A) whether the payment is interest or dividends. 
B) the marginal propensity to save. 
C) the interest rate. 
D) sunk costs.

Question 8

When government spending is less than net taxes:

Accepted Answer

A) there is a budget deficit. 
B) government savings is negative. 
C) there is budget surplus. 
D) the economy is moving toward a balanced budget. 
A) there is a budget deficit. 
B) government savings is negative. 
C) there is budget surplus. 
D) the economy is moving toward a balanced budget.

Question 9

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. How much is investment spending?

Accepted Answer

A) $3.5 trillion 
B) $3 trillion 
C) $2.5 trillion 
D) $2 trillion 
A) $3.5 trillion 
B) $3 trillion 
C) $2.5 trillion 
D) $2 trillion

Question 10

Your textbook costs $90, and you can resell it in one year for $45. If the annual interest rate is 10%, then the present value of the textbook's resale value (to the nearest dollar) is:

Accepted Answer

A) $90. 
B) $41. 
C) $45. 
D) $37. 
A) $90. 
B) $41. 
C) $45. 
D) $37.

Question 11

According to the savings-investment spending identity, savings and investment spending are the most important components of GDP.

Accepted Answer

A) True 
 B)False

Question 12

The value of a stock depends primarily on investors' assessments of its value in the past.

Accepted Answer

A) True 
 B)False

Question 13

Use the following to answer question :
Figure: Supply of Loanable Funds  
-(Figure: Supply of Loanable Funds) Look at the figure Supply of Loanable Funds. When the interest rate rises from 6% to 8%, the:

Accepted Answer

A) supply of loanable funds rises by $20 billion. 
B) quantity supplied of loanable funds rises by $20 billion. 
C) supply of loanable funds falls by $10 billion. 
D) quantity supplied of loanable funds falls by $20 billion. 
A) supply of loanable funds rises by $20 billion. 
B) quantity supplied of loanable funds rises by $20 billion. 
C) supply of loanable funds falls by $10 billion. 
D) quantity supplied of loanable funds falls by $20 billion.

Question 14

According to the efficient markets hypothesis, if you are trying to find out what a stock is really worth, you should:

Accepted Answer

A) look up the current stock price. 
B) study past trends in the stock price. 
C) study the underlying determinants of the company's future profits. 
D) examine its recent price changes. 
A) look up the current stock price. 
B) study past trends in the stock price. 
C) study the underlying determinants of the company's future profits. 
D) examine its recent price changes.

Question 15

If stock prices follow a random walk, it means that stock prices are:

Accepted Answer

A) unpredictable. 
B) increasing. 
C) decreasing 
D) constant. 
A) unpredictable. 
B) increasing. 
C) decreasing 
D) constant.

Question 16

You are given the choice of receiving $100 today or $115 one year from today. What annual interest rate will make you indifferent between these two choices?

Accepted Answer

A) 5% 
B) 10% 
C) 15% 
D) 20% 
A) 5% 
B) 10% 
C) 15% 
D) 20%

Question 17

Which of the following financial asset(s) is (are) a share of ownership in a company?
I. bonds
II. loan-backed securities
III. stocks

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 18

The demand curve for loanable funds slopes:

Accepted Answer

A) upward, since it takes a higher rate of return to get more funds. 
B) downward, because more potential projects yield 10% than yield 5%. 
C) upward, because higher rates of return are necessary to cover higher costs. 
D) downward, because demand is lower when the price to borrow money is higher. 
A) upward, since it takes a higher rate of return to get more funds. 
B) downward, because more potential projects yield 10% than yield 5%. 
C) upward, because higher rates of return are necessary to cover higher costs. 
D) downward, because demand is lower when the price to borrow money is higher.

Question 19

Lower interest rates will lead to less investment spending.

Accepted Answer

A) True 
 B)False

Question 20

The primary purpose of financial intermediaries is to redistribute wealth by implementing a progressive income tax.

Accepted Answer

A) True 
 B)False

The present value of $1 to be paid 10 years in the future will increase with the interest rate.

Although loan-backed securities provide more diversification than individual loans, they are much less liquid than individual loans.

Which of the following is a tangible object that can be used to generate future income? I. a financial asset II. a physical asset III. a liability

You are choosing whether to purchase a bond or stock. If you purchase the bond, you are likely to receive a _ return in exchange for a _ level of risk.

A physical asset is:

If in an open economy a country imports more than it exports and the government budget deficit increases, interest rates will _ and the amount of borrowing will _.

The present value of future payments depends on:

When government spending is less than net taxes:

Your textbook costs $90, and you can resell it in one year for $45. If the annual interest rate is 10%, then the present value of the textbook's resale value (to the nearest dollar) is:

According to the savings-investment spending identity, savings and investment spending are the most important components of GDP.

The value of a stock depends primarily on investors' assessments of its value in the past.

Use the following to answer question : Figure: Supply of Loanable Funds -(Figure: Supply of Loanable Funds) Look at the figure Supply of Loanable Funds. When the interest rate rises from 6% to 8%, the:

According to the efficient markets hypothesis, if you are trying to find out what a stock is really worth, you should:

If stock prices follow a random walk, it means that stock prices are:

You are given the choice of receiving $100 today or $115 one year from today. What annual interest rate will make you indifferent between these two choices?

Which of the following financial asset(s) is (are) a share of ownership in a company? I. bonds II. loan-backed securities III. stocks

The demand curve for loanable funds slopes:

Lower interest rates will lead to less investment spending.

The primary purpose of financial intermediaries is to redistribute wealth by implementing a progressive income tax.

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 present value of $1 to be paid 10 years in the future will increase with the interest rate.

Although loan-backed securities provide more diversification than individual loans, they are much less liquid than individual loans.

Which of the following is a tangible object that can be used to generate future income? I. a financial asset II. a physical asset III. a liability

You are choosing whether to purchase a bond or stock. If you purchase the bond, you are likely to receive a _____ return in exchange for a _____ level of risk.

A physical asset is:

If in an open economy a country imports more than it exports and the government budget deficit increases, interest rates will _____ and the amount of borrowing will _____.

The present value of future payments depends on:

When government spending is less than net taxes:

Your textbook costs $90, and you can resell it in one year for $45. If the annual interest rate is 10%, then the present value of the textbook's resale value (to the nearest dollar) is:

According to the savings-investment spending identity, savings and investment spending are the most important components of GDP.

The value of a stock depends primarily on investors' assessments of its value in the past.

Use the following to answer question : Figure: Supply of Loanable Funds -(Figure: Supply of Loanable Funds) Look at the figure Supply of Loanable Funds. When the interest rate rises from 6% to 8%, the:

According to the efficient markets hypothesis, if you are trying to find out what a stock is really worth, you should:

If stock prices follow a random walk, it means that stock prices are:

You are given the choice of receiving $100 today or $115 one year from today. What annual interest rate will make you indifferent between these two choices?

Which of the following financial asset(s) is (are) a share of ownership in a company? I. bonds II. loan-backed securities III. stocks

The demand curve for loanable funds slopes:

Lower interest rates will lead to less investment spending.

The primary purpose of financial intermediaries is to redistribute wealth by implementing a progressive income tax.

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

You are choosing whether to purchase a bond or stock. If you purchase the bond, you are likely to receive a _ return in exchange for a _ level of risk.

If in an open economy a country imports more than it exports and the government budget deficit increases, interest rates will _ and the amount of borrowing will _.