Exam 8: Saving, Investment, and the Financial System

In examining the national income accounts of the closed economy of Nepotocracy you see that this year it had taxes of $100 billion, transfers of $20 billion, and government purchases of goods and services of $70 billion. You also notice that last year it had private saving of $70 billion and investment of $50 billion. In which year did Nepotocracy have a budget deficit of $20 billion?

When a firm wants to borrow directly from the public to finance the purchase of new equipment, it does so by selling bonds.

The Eye of Horus incense company has $10 million in cash which it has accumulated from retained earnings. It was planning to use the money to build a new factory. Recently, the rate of interest has increased. The increase in the rate of interest should

An increase in the demand for loanable funds increases the equilibrium interest rate and increases the equilibrium level of saving.

Which of the following statements is correct?

Stock in Tasty Greens Restaurants is selling at $80 per share with 1 million shares outstanding. Last year, Tasty Greens earned $4 million, of which it retained $2.4 million for future investments. The dividend yield on the stock is

Other things the same, an increase in the budget deficit

Norberto is opening a bicycle shop, and his monthly expenditures to get the shop up and running exceed his monthly income. Norberto is best described as a

Suppose that the tires of a certain tire manufacturer are discovered to be defective. Other things the same, this news would cause

Which of the following involves financial intermediation?

Buskin's Corporation has issued 2 million shares of stock. Its earnings were $10 million, of which it retained 40 percent. What was the dividend per share?

If the supply of and demand for loanable funds both shift left, which of the following necessarily happens?

Given that Monika's income exceeds her expenditures, Monika is best described as a

According to the definitions of private and public saving, if Y, C, and G remained the same, an increase in taxes would

The ratio of government debt to GDP was higher during the Reagan presidency than at any previous time in U.S. history.

Borrowers can and sometimes do) default on their loans when

If Canada goes from a large budget deficit to a small budget deficit, it will

In a closed economy, investment must be equal to private saving.

In the market for loanable funds, the interaction of the demand for, and supply of, loanable funds determines the equilibrium level of

Mutual funds are a type of financial intermediary.