Question 1

A bank loan is a(n) _____ to the borrower and a(n) _____ to the bank.

Accepted Answer

A) asset; liability 
B) asset; asset 
C) liability; liability 
D) liability; asset 
A) asset; liability 
B) asset; asset 
C) liability; liability 
D) liability; asset

Question 2

If the price of an asset is expected to rise in the future:

Accepted Answer

A) asset owners will be more willing to sell it now. 
B) it will be more in demand today. 
C) the price of the asset will fall today. 
D) the market is irrational. 
A) asset owners will be more willing to sell it now. 
B) it will be more in demand today. 
C) the price of the asset will fall today. 
D) the market is irrational.

Question 3

Which of the following is a paper claim that entitles the buyer to future income from the seller?
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

Use the following to answer question :
Figure: Market for Loanable Funds I  
-(Figure: Market for Loanable Funds I) Look at the figure Market for Loanable Funds I. The equilibrium interest rate in the loanable funds market is:

Accepted Answer

A) 2%. 
B) 4%. 
C) 6%. 
D) 8%. 
A) 2%. 
B) 4%. 
C) 6%. 
D) 8%.

Question 5

A loan is:

Accepted Answer

A) a liability for the lender and an asset for the borrower. 
B) a physical asset that is traded in financial markets. 
C) a claim on a bank that obliges the bank to provide funds to a lender. 
D) a liability for the borrower and an asset for the lender. 
A) a liability for the lender and an asset for the borrower. 
B) a physical asset that is traded in financial markets. 
C) a claim on a bank that obliges the bank to provide funds to a lender. 
D) a liability for the borrower and an asset for the lender.

Question 6

Which of the following is an advantage to the recipient of foreign investment?

Accepted Answer

A) Foreigners are content to receive lower profits and interest rates than are domestic investors. 
B) Foreigners don't expect to receive profits and interest as often as do domestic investors. 
C) Domestic firms with foreign investors are exempt from domestic income taxes on a portion of their net income. 
D) Foreign companies often bring new technology to the recipient country, and this increases productivity. 
A) Foreigners are content to receive lower profits and interest rates than are domestic investors. 
B) Foreigners don't expect to receive profits and interest as often as do domestic investors. 
C) Domestic firms with foreign investors are exempt from domestic income taxes on a portion of their net income. 
D) Foreign companies often bring new technology to the recipient country, and this increases productivity.

Question 7

Loans are more liquid than bonds because they are more standardized than bonds.

Accepted Answer

A) True 
 B)False

Question 8

The government saves when it:

Accepted Answer

A) has a balanced budget. 
B) has a budget deficit. 
C) has a budget surplus. 
D) borrows by selling bonds. 
A) has a balanced budget. 
B) has a budget deficit. 
C) has a budget surplus. 
D) borrows by selling bonds.

Question 9

If interest rates are high, people are willing to forgo consumption and save more, all else equal.

Accepted Answer

A) True 
 B)False

Question 10

Investment spending in a closed economy must equal GDP minus consumption minus government spending.

Accepted Answer

A) True 
 B)False

Question 11

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 amount of investment demanded is:

Accepted Answer

A) $800. 
B) $1,000. 
C) $2,000. 
D) $4,000. 
A) $800. 
B) $1,000. 
C) $2,000. 
D) $4,000.

Question 12

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. If the interest rate is higher than _____, the quantity supplied of loanable funds will _____ the quantity of loanable funds demanded.

Accepted Answer

A) 8%; be greater than 
B) 8%; be less than 
C) 8%; equal 
D) 10%; be less than 
A) 8%; be greater than 
B) 8%; be less than 
C) 8%; equal 
D) 10%; be less than

Question 13

Which index includes smaller companies, many in the technology sector?

Accepted Answer

A) the Dow Jones Industrial Average 
B) the producer price index 
C) the S&P 500 
D) the NASDAQ 
A) the Dow Jones Industrial Average 
B) the producer price index 
C) the S&P 500 
D) the NASDAQ

Question 14

The demand for loanable funds is _____ sloping because _____ respond to lower interest rates by _____ their quantity demanded of loanable funds.

Accepted Answer

A) downward; investors; increasing 
B) downward; savers; increasing 
C) upward; investors; decreasing 
D) upward; savers; decreasing 
A) downward; investors; increasing 
B) downward; savers; increasing 
C) upward; investors; decreasing 
D) upward; savers; decreasing

Question 15

Life insurance companies are financial intermediaries that sell policies to savers and guarantee a payment to the policyholder's beneficiaries when the policyholder dies.

Accepted Answer

A) True 
 B)False

Question 16

Suppose that Ann bought a share of General Motors stock. The stock is a(n) _____ for Ann and a(n) _____ for General Motors.

Accepted Answer

A) asset; asset 
B) asset; liability 
C) liability; asset 
D) liability; liability 
A) asset; asset 
B) asset; liability 
C) liability; asset 
D) liability; liability

Question 17

The interest rate is 5% in the market for loanable funds. Investors wish to borrow $100 million and savers wish to save $125 million at this interest rate. We would expect the interest rate to _____, as there is a _____ of loanable funds.

Accepted Answer

A) fall; shortage 
B) rise; surplus 
C) rise; shortage 
D) fall; surplus 
A) fall; shortage 
B) rise; surplus 
C) rise; shortage 
D) fall; surplus

Question 18

A random walk occurs when an asset price:

Accepted Answer

A) moves in a predicable direction but with random error. 
B) makes unpredictable movements. 
C) moves in a predictable way with no error. 
D) moves slowly but predictably. 
A) moves in a predicable direction but with random error. 
B) makes unpredictable movements. 
C) moves in a predictable way with no error. 
D) moves slowly but predictably.

Question 19

Use the following to answer questions :
Scenario: A Small Economy
Suppose there is no trade and no government in a small economy. GDP is $25 trillion, and consumption spending is $18 trillion this year.
-(Scenario: A Small Economy) Look at the scenario A Small Economy. What is the level of investment spending?

Accepted Answer

A) $18 trillion 
B) $7 trillion 
C) $25 trillion 
D) -$7 trillion 
A) $18 trillion 
B) $7 trillion 
C) $25 trillion 
D) -$7 trillion

Question 20

If a country's capital inflow exceeds outflow, then foreigners are contributing to the domestic country's investment spending.

Accepted Answer

A) True 
 B)False

A bank loan is a(n) _ to the borrower and a(n) _ to the bank.

If the price of an asset is expected to rise in the future:

Which of the following is a paper claim that entitles the buyer to future income from the seller? I. a financial asset II. a physical asset III. a liability

Use the following to answer question : Figure: Market for Loanable Funds I -(Figure: Market for Loanable Funds I) Look at the figure Market for Loanable Funds I. The equilibrium interest rate in the loanable funds market is:

A loan is:

Which of the following is an advantage to the recipient of foreign investment?

Loans are more liquid than bonds because they are more standardized than bonds.

The government saves when it:

If interest rates are high, people are willing to forgo consumption and save more, all else equal.

Investment spending in a closed economy must equal GDP minus consumption minus government spending.

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 amount of investment demanded is:

Which index includes smaller companies, many in the technology sector?

The demand for loanable funds is ___ sloping because _ respond to lower interest rates by ___ their quantity demanded of loanable funds.

Life insurance companies are financial intermediaries that sell policies to savers and guarantee a payment to the policyholder's beneficiaries when the policyholder dies.

Suppose that Ann bought a share of General Motors stock. The stock is a(n) _ for Ann and a(n) _ for General Motors.

The interest rate is 5% in the market for loanable funds. Investors wish to borrow $100 million and savers wish to save $125 million at this interest rate. We would expect the interest rate to _, as there is a _ of loanable funds.

A random walk occurs when an asset price:

If a country's capital inflow exceeds outflow, then foreigners are contributing to the domestic country's investment spending.

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

A bank loan is a(n) _____ to the borrower and a(n) _____ to the bank.

If the price of an asset is expected to rise in the future:

Which of the following is a paper claim that entitles the buyer to future income from the seller? I. a financial asset II. a physical asset III. a liability

Use the following to answer question : Figure: Market for Loanable Funds I -(Figure: Market for Loanable Funds I) Look at the figure Market for Loanable Funds I. The equilibrium interest rate in the loanable funds market is:

A loan is:

Which of the following is an advantage to the recipient of foreign investment?

Loans are more liquid than bonds because they are more standardized than bonds.

The government saves when it:

If interest rates are high, people are willing to forgo consumption and save more, all else equal.

Investment spending in a closed economy must equal GDP minus consumption minus government spending.

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 amount of investment demanded is:

Which index includes smaller companies, many in the technology sector?

The demand for loanable funds is _____ sloping because _____ respond to lower interest rates by _____ their quantity demanded of loanable funds.

Life insurance companies are financial intermediaries that sell policies to savers and guarantee a payment to the policyholder's beneficiaries when the policyholder dies.

Suppose that Ann bought a share of General Motors stock. The stock is a(n) _____ for Ann and a(n) _____ for General Motors.

The interest rate is 5% in the market for loanable funds. Investors wish to borrow $100 million and savers wish to save $125 million at this interest rate. We would expect the interest rate to _____, as there is a _____ of loanable funds.

A random walk occurs when an asset price:

If a country's capital inflow exceeds outflow, then foreigners are contributing to the domestic country's investment spending.

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

A bank loan is a(n) _ to the borrower and a(n) _ to the bank.

The demand for loanable funds is ___ sloping because _ respond to lower interest rates by ___ their quantity demanded of loanable funds.

Suppose that Ann bought a share of General Motors stock. The stock is a(n) _ for Ann and a(n) _ for General Motors.

The interest rate is 5% in the market for loanable funds. Investors wish to borrow $100 million and savers wish to save $125 million at this interest rate. We would expect the interest rate to _, as there is a _ of loanable funds.