Question 1

Besides decreasing the number of banks,how do bank failures hinder financial intermediation?

Accepted Answer

During periods of bank failures,it becom

Question 2

In the lifecycle theory,a worker does most of her borrowing during her prime working years.

Accepted Answer

A) True 
 B)False

Question 3

If the recent financial crisis raises awareness about the dangers of not saving,leading to an increase in overall savings rates across the country,the loanable funds market will experience an increase in the _____ loanable funds and _____ in equilibrium interest rates.

Accepted Answer

A)  demand for;an increase 
B)  supply of;an increase 
C)  demand for;a decrease 
D)  supply of;a decrease 
A)  demand for;an increase 
B)  supply of;an increase 
C)  demand for;a decrease 
D)  supply of;a decrease

Question 4

Most individuals prefer to consume as much as their income allows in every period.

Accepted Answer

A) True 
 B)False

Question 5

A leverage ratio is the ratio of:

Accepted Answer

A)  equity to debt. 
B)  debt to equity. 
C)  unpaid mortgage to equity. 
D)  equity to unpaid mortgage. 
A)  equity to debt. 
B)  debt to equity. 
C)  unpaid mortgage to equity. 
D)  equity to unpaid mortgage.

Question 6

When business firms become more pessimistic about the state of the economy,the:

Accepted Answer

A)  demand to borrow shifts outward. 
B)  demand to borrow shifts inward. 
C)  supply of savings shifts outward. 
D)  supply of savings shifts inward. 
A)  demand to borrow shifts outward. 
B)  demand to borrow shifts inward. 
C)  supply of savings shifts outward. 
D)  supply of savings shifts inward.

Question 7

Why are investment tax credits usually temporary?

Accepted Answer

Tax credits are generally given to encou

Question 8

According to the life cycle theory of savings,a typical person's:

Accepted Answer

A)  saving is smooth over their entire lifetime. 
B)  consumption is smooth over their entire lifetime. 
C)  consumption in a given year is related to their income in that year. 
D)  saving is the highest when they die. 
A)  saving is smooth over their entire lifetime. 
B)  consumption is smooth over their entire lifetime. 
C)  consumption in a given year is related to their income in that year. 
D)  saving is the highest when they die.

Question 9

The potential of a bond issuer not being able to repay the bond holder is called:

Accepted Answer

A)  moral hazard. 
B)  default risk. 
C)  payment jeopardy. 
D)  repayment peril. 
A)  moral hazard. 
B)  default risk. 
C)  payment jeopardy. 
D)  repayment peril.

Question 10

An increase in the supply of saving curve 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 11

Bonds sold by the U.S.government have almost zero default risk.

Accepted Answer

A) True 
 B)False

Question 12

At lower interest rates,the cost of investing _____ and the quantity of funds demanded for investment _____.

Accepted Answer

A)  decreases;increases 
B)  increases;decreases 
C)  increases;increases 
D)  decreases;decreases 
A)  decreases;increases 
B)  increases;decreases 
C)  increases;increases 
D)  decreases;decreases

Question 13

China has a higher saving rate than the United States.One economic explanation for this fact is that:

Accepted Answer

A)  Americans are more irrational than the Chinese. 
B)  Americans are more rational than the Chinese. 
C)  there is a lower rate of time preference for Americans than for the Chinese. 
D)  there is a higher rate of time preference for Americans than for the Chinese. 
A)  Americans are more irrational than the Chinese. 
B)  Americans are more rational than the Chinese. 
C)  there is a lower rate of time preference for Americans than for the Chinese. 
D)  there is a higher rate of time preference for Americans than for the Chinese.

Question 14

The study of financial institutions such as banks,stock markets,and bond markets is usually included in finance courses.Why are these finance topics covered in a macroeconomics course?

Accepted Answer

These topics are included in a macroecon

Question 15

Use the following to answer questions 
Figure: Loanable Funds Market
 
-(Figure: Loanable Funds Market)Refer to the figure of the loanable funds market.At an interest rate of 6% in this market,there is a _____ of loanable funds of _____.

Accepted Answer

A)  shortage;$320 
B)  surplus;$250 
C)  shortage;$250 
D)  surplus;$320 
A)  shortage;$320 
B)  surplus;$250 
C)  shortage;$250 
D)  surplus;$320

Question 16

Bond prices move inversely with interest rates and time spans to maturity.

Accepted Answer

A) True 
 B)False

Question 17

An increase in the demand for borrowing will cause the equilibrium quantity of borrowing 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 18

Which variable is determined in the market for loanable funds?

Accepted Answer

A)  income 
B)  consumption 
C)  investment 
D)  the interest rate 
A)  income 
B)  consumption 
C)  investment 
D)  the interest rate

Question 19

The savings supply curve is:

Accepted Answer

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

Question 20

What effect will an investment tax credit have on interest rates and the quantity of savings?

Accepted Answer

A)  There will be no effect because investment tax credits only affect the amount of taxes paid by firms. 
B)  Both interest rates and the quantity of savings will increase. 
C)  Interest rates will decrease and the quantity of savings will increase. 
D)  Interest rates will not change,but the quantity of savings will decrease. 
A)  There will be no effect because investment tax credits only affect the amount of taxes paid by firms. 
B)  Both interest rates and the quantity of savings will increase. 
C)  Interest rates will decrease and the quantity of savings will increase. 
D)  Interest rates will not change,but the quantity of savings will decrease.

Exam 9: Saving,investment,and the Financial System

Besides decreasing the number of banks,how do bank failures hinder financial intermediation?

In the lifecycle theory,a worker does most of her borrowing during her prime working years.

If the recent financial crisis raises awareness about the dangers of not saving,leading to an increase in overall savings rates across the country,the loanable funds market will experience an increase in the _____ loanable funds and _____ in equilibrium interest rates.

Most individuals prefer to consume as much as their income allows in every period.

A leverage ratio is the ratio of:

When business firms become more pessimistic about the state of the economy,the:

Why are investment tax credits usually temporary?

According to the life cycle theory of savings,a typical person's:

The potential of a bond issuer not being able to repay the bond holder is called:

An increase in the supply of saving curve will cause the equilibrium interest rate to:

Bonds sold by the U.S.government have almost zero default risk.

At lower interest rates,the cost of investing _____ and the quantity of funds demanded for investment _____.

China has a higher saving rate than the United States.One economic explanation for this fact is that:

The study of financial institutions such as banks,stock markets,and bond markets is usually included in finance courses.Why are these finance topics covered in a macroeconomics course?

Use the following to answer questions Figure: Loanable Funds Market -(Figure: Loanable Funds Market)Refer to the figure of the loanable funds market.At an interest rate of 6% in this market,there is a _____ of loanable funds of _____.

Bond prices move inversely with interest rates and time spans to maturity.

An increase in the demand for borrowing will cause the equilibrium quantity of borrowing to:

Which variable is determined in the market for loanable funds?

The savings supply curve is:

What effect will an investment tax credit have on interest rates and the quantity of savings?

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

If the recent financial crisis raises awareness about the dangers of not saving,leading to an increase in overall savings rates across the country,the loanable funds market will experience an increase in the _ loanable funds and _ in equilibrium interest rates.

At lower interest rates,the cost of investing _ and the quantity of funds demanded for investment _.

Use the following to answer questions Figure: Loanable Funds Market -(Figure: Loanable Funds Market)Refer to the figure of the loanable funds market.At an interest rate of 6% in this market,there is a _ of loanable funds of _.