Question 1

A mutual fund

Accepted Answer

A)  is a financial institution that stands between savers and borrowers. 
B)  is a financial intermediary. 
C)  allows people with small amounts of money to diversify their holdings. 
D)  All of the above are correct. 
A)  is a financial institution that stands between savers and borrowers. 
B)  is a financial intermediary. 
C)  allows people with small amounts of money to diversify their holdings. 
D)  All of the above are correct.

Question 2

Suppose there is a shortage in the market for loanable funds. Is the interest rate above or below its equilibrium level? How do desired saving and desired investment at this interest rate compare?

Accepted Answer

The interest rate is below its

Question 3

It is claimed that mutual funds have two advantages. The first is that mutual funds allow people with small amounts of money to diversify. The second is that mutual funds provide the skills of professional money managers who buy stocks they believe will be the most profitable and thereby increase the return that mutual fund depositors earn on their savings.

Accepted Answer

A)  Economists strongly agree with both claims. 
B)  Economists are skeptical of both claims. 
C)  Economists are skeptical of the first claim, but strongly agree with the second. 
D)  Economists strongly agree with the first claim, but are skeptical of the second. 
A)  Economists strongly agree with both claims. 
B)  Economists are skeptical of both claims. 
C)  Economists are skeptical of the first claim, but strongly agree with the second. 
D)  Economists strongly agree with the first claim, but are skeptical of the second.

Question 4

Stocks and bonds

Accepted Answer

A)  and checking accounts are all stores of value and commonly function as mediums of exchange. 
B)  and checking accounts are all stores of value, but only stocks and bonds commonly function as mediums of exchange. 
C)  and checking accounts are all stores of value, but only checking accounts commonly function as mediums of exchange. 
D)  and checking accounts all commonly function as mediums of exchange, but only stocks and bonds are a store of value. 
A)  and checking accounts are all stores of value and commonly function as mediums of exchange. 
B)  and checking accounts are all stores of value, but only stocks and bonds commonly function as mediums of exchange. 
C)  and checking accounts are all stores of value, but only checking accounts commonly function as mediums of exchange. 
D)  and checking accounts all commonly function as mediums of exchange, but only stocks and bonds are a store of value.

Question 5

Other things the same, the effects of an increase in transfer payments on the government's budget deficit will lead to

Accepted Answer

A)  greater investment. 
B)  a higher interest rate. 
C)  higher public saving. 
D)  All of the above are correct. 
A)  greater investment. 
B)  a higher interest rate. 
C)  higher public saving. 
D)  All of the above are correct.

Question 6

When a corporation experiences financial problems, bondholders are paid before stockholders.

Accepted Answer

A) True 
 B)False

Question 7

You observe a closed economy that has a government deficit and positive investment. Which of the following is correct?

Accepted Answer

A)  Private and public saving are both positive. 
B)  Private saving is positive; public saving is negative. 
C)  Private saving is negative; public saving is positive. 
D)  Both private saving and public saving are negative. 
A)  Private and public saving are both positive. 
B)  Private saving is positive; public saving is negative. 
C)  Private saving is negative; public saving is positive. 
D)  Both private saving and public saving are negative.

Question 8

Use the following table to answer the following questions.
Table 26-2
  
-Refer to Table 26-2. Which company had the highest dollar dividend per share?

Accepted Answer

A)  Boeing Co. 
B)  Eli Lilly and Co. 
C)  Kraft Foods Group 
D)  Kellogg Co. 
A)  Boeing Co. 
B)  Eli Lilly and Co. 
C)  Kraft Foods Group 
D)  Kellogg Co.

Question 9

A municipal bond is

Accepted Answer

A)  issued by the federal government. 
B)  issued by state and local governments. 
C)  issued by corporations. 
D)  issued by households. 
A)  issued by the federal government. 
B)  issued by state and local governments. 
C)  issued by corporations. 
D)  issued by households.

Question 10

A decrease in government spending and the enactment of an investment tax credit would definitely cause

Accepted Answer

A)  the quantity of loanable funds traded to increase. 
B)  the interest rate to increase. 
C)  the quantity of loanable funds traded to decrease. 
D)  the interest rate to decrease. 
A)  the quantity of loanable funds traded to increase. 
B)  the interest rate to increase. 
C)  the quantity of loanable funds traded to decrease. 
D)  the interest rate to decrease.

Question 11

Y = C + I + G + NX is an identity because

Accepted Answer

A)  each symbol identifies a macroeconomic variable. 
B)  the right-hand and left-hand sides are equal when an equilibrium is reached. 
C)  the equality holds due to the way the variables are defined. 
D)  None of the above is correct. 
A)  each symbol identifies a macroeconomic variable. 
B)  the right-hand and left-hand sides are equal when an equilibrium is reached. 
C)  the equality holds due to the way the variables are defined. 
D)  None of the above is correct.

Question 12

Which of the following statements is correct?

Accepted Answer

A)  The expected future profitability of a corporation influences the demand for that corporation's stock. 
B)  When a corporation sells stock as a means of raising funds it is engaging in debt finance. 
C)  The owners of bonds sold by the Microsoft Corporation are part owners of that corporation. 
D)  All bonds are, by definition, perpetuities. 
A)  The expected future profitability of a corporation influences the demand for that corporation's stock. 
B)  When a corporation sells stock as a means of raising funds it is engaging in debt finance. 
C)  The owners of bonds sold by the Microsoft Corporation are part owners of that corporation. 
D)  All bonds are, by definition, perpetuities.

Question 13

Which of the following events could explain an increase in interest rates together with a decrease in investment?

Accepted Answer

A)  The government budget went from surplus to deficit. 
B)  The government instituted an investment tax credit. 
C)  The government reduced the tax rate on savings. 
D)  None of the above is correct. 
A)  The government budget went from surplus to deficit. 
B)  The government instituted an investment tax credit. 
C)  The government reduced the tax rate on savings. 
D)  None of the above is correct.

Question 14

Which of the following statements is correct?

Accepted Answer

A)  A large, well-known corporation such as Intel generally would use financial intermediation to finance expansion of its facilities. 
B)  On average, managed funds outperform indexed funds. 
C)  Unlike corporate bonds and stocks, checking accounts are a medium of exchange. 
D)  A mutual fund is a financial market. 
A)  A large, well-known corporation such as Intel generally would use financial intermediation to finance expansion of its facilities. 
B)  On average, managed funds outperform indexed funds. 
C)  Unlike corporate bonds and stocks, checking accounts are a medium of exchange. 
D)  A mutual fund is a financial market.

Question 15

When the government goes from running a balanced budget to running a budget surplus,

Accepted Answer

A)  national saving decreases, the interest rate rises, and the economy's long­run growth rate is likely to decrease. 
B)  national saving increases, the interest rate falls, and the economy's long­run growth rate is likely to decrease. 
C)  national saving decreases, the interest rate rises, and the economy's long­run growth rate is likely to increase. 
D)  national saving increases, the interest rate falls, and the economy's long­run growth rate is likely to increase. 
A)  national saving decreases, the interest rate rises, and the economy's long­run growth rate is likely to decrease. 
B)  national saving increases, the interest rate falls, and the economy's long­run growth rate is likely to decrease. 
C)  national saving decreases, the interest rate rises, and the economy's long­run growth rate is likely to increase. 
D)  national saving increases, the interest rate falls, and the economy's long­run growth rate is likely to increase.

Question 16

A particular stock pays an annual dividend of $2 per share and the annual dividend yield is 2.5 percent. The price of a share of this stock is

Accepted Answer

A)  $2.05. 
B)  $5.00. 
C)  $80.00 
D)  $50.00. 
A)  $2.05. 
B)  $5.00. 
C)  $80.00 
D)  $50.00.

Question 17

For an imaginary economy, when the real interest rate is 5 percent, the quantity of loanable funds demanded is $1,000 and the quantity of loanable funds supplied is $1,000. Currently, the nominal interest rate is 9 percent and the inflation rate is 2 percent. Currently,

Accepted Answer

A)  the market for loanable funds is in equilibrium. 
B)  the quantity of loanable funds supplied exceeds the quantity of loanable funds demanded, and as a result the real interest rate will rise. 
C)  the quantity of loanable funds supplied exceeds the quantity of loanable funds demanded, and as a result the real interest rate will fall. 
D)  the quantity of loanable funds demanded exceeds the quantity of loanable funds supplied, and as a result the real interest rate will rise. 
A)  the market for loanable funds is in equilibrium. 
B)  the quantity of loanable funds supplied exceeds the quantity of loanable funds demanded, and as a result the real interest rate will rise. 
C)  the quantity of loanable funds supplied exceeds the quantity of loanable funds demanded, and as a result the real interest rate will fall. 
D)  the quantity of loanable funds demanded exceeds the quantity of loanable funds supplied, and as a result the real interest rate will rise.

Question 18

A budget deficit

Accepted Answer

A)  changes the supply of loanable funds. 
B)  changes the demand for loanable funds. 
C)  changes both the supply of and demand for loanable funds. 
D)  does not influence the supply of or the demand for loanable funds. 
A)  changes the supply of loanable funds. 
B)  changes the demand for loanable funds. 
C)  changes both the supply of and demand for loanable funds. 
D)  does not influence the supply of or the demand for loanable funds.

Question 19

Scenario 26-3. Assume the following information for an imaginary, open economy.
Consumption = $1,000; investment = $200; net exports = -$50; taxes = $230; private saving = $225; and national saving = $150.
-Refer to Scenario 26-3. For this economy, government purchases amount to

Accepted Answer

A)  $330. 
B)  $280. 
C)  $305. 
D)  $310. 
A)  $330. 
B)  $280. 
C)  $305. 
D)  $310.

Question 20

National saving is the sum of and . In a closed economy it is equal to in equilibrium.

Accepted Answer

private saving, publ

A mutual fund

Suppose there is a shortage in the market for loanable funds. Is the interest rate above or below its equilibrium level? How do desired saving and desired investment at this interest rate compare?

Stocks and bonds

Other things the same, the effects of an increase in transfer payments on the government's budget deficit will lead to

When a corporation experiences financial problems, bondholders are paid before stockholders.

You observe a closed economy that has a government deficit and positive investment. Which of the following is correct?

Use the following table to answer the following questions. Table 26-2 -Refer to Table 26-2. Which company had the highest dollar dividend per share?

A municipal bond is

A decrease in government spending and the enactment of an investment tax credit would definitely cause

Y = C + I + G + NX is an identity because

Which of the following statements is correct?

Which of the following events could explain an increase in interest rates together with a decrease in investment?

Which of the following statements is correct?

When the government goes from running a balanced budget to running a budget surplus,

A particular stock pays an annual dividend of $2 per share and the annual dividend yield is 2.5 percent. The price of a share of this stock is

For an imaginary economy, when the real interest rate is 5 percent, the quantity of loanable funds demanded is $1,000 and the quantity of loanable funds supplied is $1,000. Currently, the nominal interest rate is 9 percent and the inflation rate is 2 percent. Currently,

A budget deficit

Scenario 26-3. Assume the following information for an imaginary, open economy. Consumption = $1,000; investment = $200; net exports = -$50; taxes = $230; private saving = $225; and national saving = $150. -Refer to Scenario 26-3. For this economy, government purchases amount to

National saving is the sum of and . In a closed economy it is equal to in equilibrium.

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

The Basic Tools of Finance

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

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Exam 8: Saving, Investment, and the Financial System

A mutual fund

Suppose there is a shortage in the market for loanable funds. Is the interest rate above or below its equilibrium level? How do desired saving and desired investment at this interest rate compare?

Stocks and bonds

Other things the same, the effects of an increase in transfer payments on the government's budget deficit will lead to

When a corporation experiences financial problems, bondholders are paid before stockholders.

You observe a closed economy that has a government deficit and positive investment. Which of the following is correct?

Use the following table to answer the following questions. Table 26-2 -Refer to Table 26-2. Which company had the highest dollar dividend per share?

A municipal bond is

A decrease in government spending and the enactment of an investment tax credit would definitely cause

Y = C + I + G + NX is an identity because

Which of the following statements is correct?

Which of the following events could explain an increase in interest rates together with a decrease in investment?

Which of the following statements is correct?

When the government goes from running a balanced budget to running a budget surplus,

A particular stock pays an annual dividend of $2 per share and the annual dividend yield is 2.5 percent. The price of a share of this stock is

For an imaginary economy, when the real interest rate is 5 percent, the quantity of loanable funds demanded is $1,000 and the quantity of loanable funds supplied is $1,000. Currently, the nominal interest rate is 9 percent and the inflation rate is 2 percent. Currently,

A budget deficit

Scenario 26-3. Assume the following information for an imaginary, open economy. Consumption = $1,000; investment = $200; net exports = -$50; taxes = $230; private saving = $225; and national saving = $150. -Refer to Scenario 26-3. For this economy, government purchases amount to

National saving is the sum of and . In a closed economy it is equal to in equilibrium.

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

The Basic Tools of Finance

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

Filters