Question 1

Shares of stock are:

Accepted Answer

A) shares of ownership in the issuing company. 
B) a tax liability for the issuing company. 
C) a tax deduction for the investor. 
D) a debt of the issuing company to the investors who purchase the stock. 
A) shares of ownership in the issuing company. 
B) a tax liability for the issuing company. 
C) a tax deduction for the investor. 
D) a debt of the issuing company to the investors who purchase the stock.

Question 2

An asset that can be quickly converted to cash with relatively little loss of value is:

Accepted Answer

A) illiquid. 
B) liquid. 
C) diversified. 
D) risk averse. 
A) illiquid. 
B) liquid. 
C) diversified. 
D) risk averse.

Question 3

The expenses involved in actually putting together and executing a deal are called liquidity costs.

Accepted Answer

A) True 
 B)False

Question 4

Given an annual interest rate of 3%, the present value of a future payment of $2,080 to be paid in one year is:

Accepted Answer

A) $1,904.76. 
B) $2,000.00. 
C) $2,019.42. 
D) $2,080.00. 
A) $1,904.76. 
B) $2,000.00. 
C) $2,019.42. 
D) $2,080.00.

Question 5

An increase in the interest rate causes a decrease in investment by shifting the loanable funds demand curve to the left.

Accepted Answer

A) True 
 B)False

Question 6

Use the following to answer questions:
Figure: Loanable Funds Market  
-(Figure: Loanable Funds Market) Look at the figure Loanable Funds Market. If the interest rate is 8%, people will want to save approximately:

Accepted Answer

A) $3 trillion. 
B) $2 trillion. 
C) $4 trillion. 
D) $1 trillion. 
A) $3 trillion. 
B) $2 trillion. 
C) $4 trillion. 
D) $1 trillion.

Question 7

A bond is a financial asset that pays a fixed amount of interest each year and then repays the principal on a given date.

Accepted Answer

A) True 
 B)False

Question 8

The efficient markets hypothesis says that:

Accepted Answer

A) stock markets reflect irrational behavior, and therefore stock prices could be overvalued or undervalued. 
B) stock prices embody much public information and therefore are not overpriced or underpriced. 
C) the three stock market indexes will provide consistent information about the stock market. 
D) financial fluctuations in markets do not affect the macro economy in a noticeable way. 
A) stock markets reflect irrational behavior, and therefore stock prices could be overvalued or undervalued. 
B) stock prices embody much public information and therefore are not overpriced or underpriced. 
C) the three stock market indexes will provide consistent information about the stock market. 
D) financial fluctuations in markets do not affect the macro economy in a noticeable way.

Question 9

An illiquid asset:

Accepted Answer

A) cannot be sold. 
B) provides the owner no return or income. 
C) is a tangible asset. 
D) cannot quickly be converted into cash with little loss of value. 
A) cannot be sold. 
B) provides the owner no return or income. 
C) is a tangible asset. 
D) cannot quickly be converted into cash with little loss of value.

Question 10

Use the following to answer questions :
Figure: Crowding Out  
-(Figure: Crowding Out) Look at the figure Crowding Out. The demand for loanable funds curve DLF1 will shift to DLF2 when there is:

Accepted Answer

A) a decrease in the government budget deficit. 
B) an increase in the government budget deficit. 
C) an increase in private savings. 
D) a decrease in private savings. 
A) a decrease in the government budget deficit. 
B) an increase in the government budget deficit. 
C) an increase in private savings. 
D) a decrease in private savings.

Question 11

The present value of a future payment _____if the _____.

Accepted Answer

A) decreases; interest rate increases 
B) increases; future payment decreases 
C) decreases; interest rate decreases 
D) increases; stock market falls 
A) decreases; interest rate increases 
B) increases; future payment decreases 
C) decreases; interest rate decreases 
D) increases; stock market falls

Question 12

Over the past 100 years, the rate of return on stocks has averaged about _____, and the return on bonds has averaged approximately _____.

Accepted Answer

A) 20%; 25% 
B) 1%; 2% 
C) -10%; 5% 
D) 7%; 2% 
A) 20%; 25% 
B) 1%; 2% 
C) -10%; 5% 
D) 7%; 2%

Question 13

The value of all accumulated savings of a household is called:

Accepted Answer

A) wealth. 
B) income. 
C) debt. 
D) wages. 
A) wealth. 
B) income. 
C) debt. 
D) wages.

Question 14

The price determined in the market for loanable funds is:

Accepted Answer

A) the margin call. 
B) the profit rate. 
C) the transaction fee. 
D) the interest rate. 
A) the margin call. 
B) the profit rate. 
C) the transaction fee. 
D) the interest rate.

Question 15

A financial asset is:

Accepted Answer

A) a physical asset like a car. 
B) a claim that entitles the owner to future income from the seller. 
C) the value of accumulated savings. 
D) another term for capital. 
A) a physical asset like a car. 
B) a claim that entitles the owner to future income from the seller. 
C) the value of accumulated savings. 
D) another term for capital.

Question 16

A business will want a loan when:

Accepted Answer

A) interest rate  (cost of project - interest rate) / interest rate × 100. 
A) interest rate  (cost of project - interest rate) / interest rate × 100.

Question 17

A decrease in the level of business opportunity will generally _____ the loanable funds demand curve.

Accepted Answer

A) not change 
B) left-shift 
C) cause a movement along 
D) right-shift 
A) not change 
B) left-shift 
C) cause a movement along 
D) right-shift

Question 18

Student loans, auto loans, and credit card loans are often securitized.

Accepted Answer

A) True 
 B)False

Question 19

Mutual funds allow investors with a relatively small amount of money to indirectly hold a diversified portfolio, which allows them to invest in stocks more safely than they could otherwise.

Accepted Answer

A) True 
 B)False

Question 20

The best way to reduce financial risk is to:

Accepted Answer

A) buy stock only in a major company. 
B) buy bonds only in a major company. 
C) buy a variety of assets, both financial and physical. 
D) never buy stock in foreign companies. 
A) buy stock only in a major company. 
B) buy bonds only in a major company. 
C) buy a variety of assets, both financial and physical. 
D) never buy stock in foreign companies.

Shares of stock are:

An asset that can be quickly converted to cash with relatively little loss of value is:

The expenses involved in actually putting together and executing a deal are called liquidity costs.

Given an annual interest rate of 3%, the present value of a future payment of $2,080 to be paid in one year is:

An increase in the interest rate causes a decrease in investment by shifting the loanable funds demand curve to the left.

Use the following to answer questions: Figure: Loanable Funds Market -(Figure: Loanable Funds Market) Look at the figure Loanable Funds Market. If the interest rate is 8%, people will want to save approximately:

A bond is a financial asset that pays a fixed amount of interest each year and then repays the principal on a given date.

The efficient markets hypothesis says that:

An illiquid asset:

Use the following to answer questions : Figure: Crowding Out -(Figure: Crowding Out) Look at the figure Crowding Out. The demand for loanable funds curve D_LF₁ will shift to D_LF₂ when there is:

The present value of a future payment _if the _.

Over the past 100 years, the rate of return on stocks has averaged about _, and the return on bonds has averaged approximately _.

The value of all accumulated savings of a household is called:

The price determined in the market for loanable funds is:

A financial asset is:

A business will want a loan when:

A decrease in the level of business opportunity will generally _____ the loanable funds demand curve.

Student loans, auto loans, and credit card loans are often securitized.

Mutual funds allow investors with a relatively small amount of money to indirectly hold a diversified portfolio, which allows them to invest in stocks more safely than they could otherwise.

The best way to reduce financial risk is to:

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

Shares of stock are:

An asset that can be quickly converted to cash with relatively little loss of value is:

The expenses involved in actually putting together and executing a deal are called liquidity costs.

Given an annual interest rate of 3%, the present value of a future payment of $2,080 to be paid in one year is:

An increase in the interest rate causes a decrease in investment by shifting the loanable funds demand curve to the left.

Use the following to answer questions: Figure: Loanable Funds Market -(Figure: Loanable Funds Market) Look at the figure Loanable Funds Market. If the interest rate is 8%, people will want to save approximately:

A bond is a financial asset that pays a fixed amount of interest each year and then repays the principal on a given date.

The efficient markets hypothesis says that:

An illiquid asset:

Use the following to answer questions : Figure: Crowding Out -(Figure: Crowding Out) Look at the figure Crowding Out. The demand for loanable funds curve DLF1 will shift to DLF2 when there is:

The present value of a future payment _____if the _____.

Over the past 100 years, the rate of return on stocks has averaged about _____, and the return on bonds has averaged approximately _____.

The value of all accumulated savings of a household is called:

The price determined in the market for loanable funds is:

A financial asset is:

A business will want a loan when:

A decrease in the level of business opportunity will generally _____ the loanable funds demand curve.

Student loans, auto loans, and credit card loans are often securitized.

Mutual funds allow investors with a relatively small amount of money to indirectly hold a diversified portfolio, which allows them to invest in stocks more safely than they could otherwise.

The best way to reduce financial risk is to:

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: Crowding Out -(Figure: Crowding Out) Look at the figure Crowding Out. The demand for loanable funds curve D_LF₁ will shift to D_LF₂ when there is:

The present value of a future payment _if the _.

Over the past 100 years, the rate of return on stocks has averaged about _, and the return on bonds has averaged approximately _.