Question 1

Investment is:

Accepted Answer

A)  the purchase of new capital goods. 
B)  the purchase of new consumption goods. 
C)  the purchase of gold and silver during inflationary times. 
D)  the purchase of shares of stock on the New York Stock Exchange. 
A)  the purchase of new capital goods. 
B)  the purchase of new consumption goods. 
C)  the purchase of gold and silver during inflationary times. 
D)  the purchase of shares of stock on the New York Stock Exchange.

Question 2

Savings is:

Accepted Answer

A)  the purchase of new capital goods. 
B)  the purchase of new consumption goods. 
C)  income that is not spent on capital goods. 
D)  income that is not spent on consumption goods. 
A)  the purchase of new capital goods. 
B)  the purchase of new consumption goods. 
C)  income that is not spent on capital goods. 
D)  income that is not spent on consumption goods.

Question 3

When Lehman Brothers went bankrupt,most of Lehman's managers:

Accepted Answer

A)  also went bankrupt. 
B)  were unaffected. 
C)  lost some money but still ended up being very rich. 
D)  committed suicide. 
A)  also went bankrupt. 
B)  were unaffected. 
C)  lost some money but still ended up being very rich. 
D)  committed suicide.

Question 4

The bond market allows both corporations and governments to borrow directly from the public instead of through banks.

Accepted Answer

A) True 
 B)False

Question 5

Crowding out occurs because the government increases the demand for loanable funds,drives up interest rates,and causes:

Accepted Answer

A)  saving to rise. 
B)  saving to fall. 
C)  consumption and investment to rise. 
D)  consumption and investment to fall. 
A)  saving to rise. 
B)  saving to fall. 
C)  consumption and investment to rise. 
D)  consumption and investment to fall.

Question 6

In order to be binding,an interest rate ceiling must:

Accepted Answer

A)  shift the supply of savings function outward. 
B)  shift the demand to borrow function outward. 
C)  be placed above equilibrium. 
D)  be placed below equilibrium. 
A)  shift the supply of savings function outward. 
B)  shift the demand to borrow function outward. 
C)  be placed above equilibrium. 
D)  be placed below equilibrium.

Question 7

What economic activity did many South Korean citizens engage in during the 1960s and 1970s to help their country increase its growth rate?

Accepted Answer

A)  increased consumer spending 
B)  increased their saving 
C)  bought and sold stocks and bonds 
D)  only bought goods made in South Korea 
A)  increased consumer spending 
B)  increased their saving 
C)  bought and sold stocks and bonds 
D)  only bought goods made in South Korea

Question 8

Treasury bills (T-bills)have a term of 30 years.

Accepted Answer

A) True 
 B)False

Question 9

In the market for loanable funds:

Accepted Answer

A)  banks supply loanable funds and the government demands loanable funds. 
B)  both savers and borrowers supply and demand loanable funds. 
C)  savers demand loanable funds and borrowers supply loanable funds. 
D)  savers supply loanable funds and borrowers demand loanable funds. 
A)  banks supply loanable funds and the government demands loanable funds. 
B)  both savers and borrowers supply and demand loanable funds. 
C)  savers demand loanable funds and borrowers supply loanable funds. 
D)  savers supply loanable funds and borrowers demand loanable funds.

Question 10

An increase in the supply of savings will cause the interest rate:

Accepted Answer

A)  to remain unchanged. 
B)  to decrease. 
C)  to increase. 
D)  to increase or decrease depending on the elasticity of demand for loanable funds. 
A)  to remain unchanged. 
B)  to decrease. 
C)  to increase. 
D)  to increase or decrease depending on the elasticity of demand for loanable funds.

Question 11

Which of the following would be the most likely to cause an increase in the demand for loanable funds?

Accepted Answer

A)  a decrease in the interest rate 
B)  an increase in savings 
C)  a decrease in consumption 
D)  an increase in government borrowing 
A)  a decrease in the interest rate 
B)  an increase in savings 
C)  a decrease in consumption 
D)  an increase in government borrowing

Question 12

The interest rate is a market quantity.

Accepted Answer

A) True 
 B)False

Question 13

The supply of savings curve shows the relationship between savings and:

Accepted Answer

A)  income. 
B)  investment. 
C)  age 
D)  the interest rate. 
A)  income. 
B)  investment. 
C)  age 
D)  the interest rate.

Question 14

An increase in the demand for borrowing will cause the equilibrium interest rate to:

Accepted Answer

A)  increase. 
B)  decrease. 
C)  remain unchanged. 
D)  first increase and then decrease. 
A)  increase. 
B)  decrease. 
C)  remain unchanged. 
D)  first increase and then decrease.

Question 15

Which of the following chains of logic explain the functions of banks in the process of economic growth?

Accepted Answer

A)  Savers deposit their savings in banks.Banks direct these funds to firms that invest and engage in capital accumulation that furthers economic growth. 
B)  Savers deposit their savings in banks.Banks engage in capital accumulation,which plays an important role in economic growth. 
C)  Firms borrow from stock and bond markets issued through banks.These funds are used for investment,which leads to the capital accumulation that furthers economic growth. 
D)  The demand for loanable funds is determined by banks and that demand fuels investment that in turn furthers economic growth. 
A)  Savers deposit their savings in banks.Banks direct these funds to firms that invest and engage in capital accumulation that furthers economic growth. 
B)  Savers deposit their savings in banks.Banks engage in capital accumulation,which plays an important role in economic growth. 
C)  Firms borrow from stock and bond markets issued through banks.These funds are used for investment,which leads to the capital accumulation that furthers economic growth. 
D)  The demand for loanable funds is determined by banks and that demand fuels investment that in turn furthers economic growth.

Question 16

Most individuals save during:

Accepted Answer

A)  the early years of life only. 
B)  the middle years of life only. 
C)  the later years of life just before retirement. 
D)  the middle and later years of life before retirement. 
A)  the early years of life only. 
B)  the middle years of life only. 
C)  the later years of life just before retirement. 
D)  the middle and later years of life before retirement.

Question 17

The demand to borrow function is:

Accepted Answer

A)  upward sloping. 
B)  downward sloping. 
C)  vertical. 
D)  horizontal. 
A)  upward sloping. 
B)  downward sloping. 
C)  vertical. 
D)  horizontal.

Question 18

If a zero-coupon bond with a face value of $1,000 costs $800,then the rate of return if held to maturity would be:

Accepted Answer

A)  -20%. 
B)  20%. 
C)  -25%. 
D)  25%. 
A)  -20%. 
B)  20%. 
C)  -25%. 
D)  25%.

Question 19

The lower the interest rate,the lower the quantity of funds demanded.

Accepted Answer

A) True 
 B)False

Question 20

Stock shares represent _____ and bonds represent _____.

Accepted Answer

A)  corporate debt;corporate ownership 
B)  corporate debt;corporate debt 
C)  corporate ownership;corporate ownership 
D)  corporate ownership;corporate debt 
A)  corporate debt;corporate ownership 
B)  corporate debt;corporate debt 
C)  corporate ownership;corporate ownership 
D)  corporate ownership;corporate debt

Exam 9: Saving,investment,and the Financial System

Investment is:

Savings is:

When Lehman Brothers went bankrupt,most of Lehman's managers:

The bond market allows both corporations and governments to borrow directly from the public instead of through banks.

Crowding out occurs because the government increases the demand for loanable funds,drives up interest rates,and causes:

In order to be binding,an interest rate ceiling must:

What economic activity did many South Korean citizens engage in during the 1960s and 1970s to help their country increase its growth rate?

Treasury bills (T-bills)have a term of 30 years.

In the market for loanable funds:

An increase in the supply of savings will cause the interest rate:

Which of the following would be the most likely to cause an increase in the demand for loanable funds?

The interest rate is a market quantity.

The supply of savings curve shows the relationship between savings and:

An increase in the demand for borrowing will cause the equilibrium interest rate to:

Which of the following chains of logic explain the functions of banks in the process of economic growth?

Most individuals save during:

The demand to borrow function is:

If a zero-coupon bond with a face value of $1,000 costs $800,then the rate of return if held to maturity would be:

The lower the interest rate,the lower the quantity of funds demanded.

Stock shares represent _____ and bonds represent _____.

The Big Ideas

The Power of Trade

Supply and Demand

Equilibrium- How Supply and Demand

Price Ceilings and Floors

GDP and the Measurement of Progress

The Wealth of Nations and Economic Growth

Growth,capital Accumulation

Stock Markets and Personal Finance

Unemployment and Labor Force Participation

Inflation and the Quantity Theory of Money

Business Fluctuations

Transmission and Amplification Mechanisms

The Federal Reserve System

Monetary Policy

The Federal Budget- Taxes and Spending

Fiscal Policy

International Trade

International Finance

Political Economy and Public Choice

Filters

Stock shares represent _ and bonds represent _.