Question 1

When tax code changes increase saving incentives, the interest rate will and investment will .

Accepted Answer

The answer of When tax code changes increase saving incentives,...

Question 2

If the government instituted an investment tax credit, then which of the following would be higher in equilibrium?

Accepted Answer

A)  saving and the interest rate 
B)  saving but not the interest rate 
C)  the interest rate but not saving 
D)  neither saving nor the interest rate 
A)  saving and the interest rate 
B)  saving but not the interest rate 
C)  the interest rate but not saving 
D)  neither saving nor the interest rate

Question 3

Bay City Mining, Inc. has a price of $20 a share, outstanding shares of 2.5 million, retained earnings of $1 million dollars, and a dividend yield of 2 percent. It has a price-earnings ratio of

Accepted Answer

A)  50, which is high by historical standards. 
B)  50, which is low by historical standards. 
C)  25, which is high by historical standards. 
D)  25, which is low by historical standards. 
A)  50, which is high by historical standards. 
B)  50, which is low by historical standards. 
C)  25, which is high by historical standards. 
D)  25, which is low by historical standards.

Question 4

Scenario 26-1. Assume the following information for an imaginary, closed economy.
GDP = $100,000; taxes = $22,000; government purchases = $25,000; national saving = $15,000.
-Refer to Scenario 26-1. This economy's government is running a

Accepted Answer

A)  budget surplus of $3,000. 
B)  budget surplus of $12,000. 
C)  budget deficit of $3,000. 
D)  budget deficit of $12,000. 
A)  budget surplus of $3,000. 
B)  budget surplus of $12,000. 
C)  budget deficit of $3,000. 
D)  budget deficit of $12,000.

Question 5

XDF Corporation had a P/E ratio of 25, earnings per share of $4, and retained earnings per share of $3. What was its dividend yield?

Accepted Answer

A)  4% 
B)  3% 
C)  1% 
D)  None of the above is correct. 
A)  4% 
B)  3% 
C)  1% 
D)  None of the above is correct.

Question 6

If the tax rate fell, holding municipal bonds would be less desirable so the interest rates on them would fall.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following could explain a decrease in the equilibrium interest rate and an increase in the equilibrium quantity of loanable funds?

Accepted Answer

A)  The demand for loanable funds shifted rightward. 
B)  The demand for loanable funds shifted leftward. 
C)  The supply of loanable funds shifted rightward. 
D)  The supply of loanable funds shifted leftward. 
A)  The demand for loanable funds shifted rightward. 
B)  The demand for loanable funds shifted leftward. 
C)  The supply of loanable funds shifted rightward. 
D)  The supply of loanable funds shifted leftward.

Question 8

The financial system coordinates investment and saving, which are important determinants of long-run real GDP.

Accepted Answer

A) True 
 B)False

Question 9

Suppose that in a closed economy GDP is 11,000, consumption is 7,500, and taxes are 500. What value of government purchases would make national savings equal to 2,000 and at that value would the government have a deficit or surplus?

Accepted Answer

A)  1,500, deficit 
B)  1,500, surplus 
C)  1,000, deficit 
D)  1,000, surplus 
A)  1,500, deficit 
B)  1,500, surplus 
C)  1,000, deficit 
D)  1,000, surplus

Question 10

An increase in the quantity of loanable funds traded means that

Accepted Answer

A)  firms are borrowing less and investment decreases. 
B)  firms are borrowing less and investment increases. 
C)  firms are borrowing more and investment increases. 
D)  firms are borrowing more and investment decreases. 
A)  firms are borrowing less and investment decreases. 
B)  firms are borrowing less and investment increases. 
C)  firms are borrowing more and investment increases. 
D)  firms are borrowing more and investment decreases.

Question 11

Other things the same, a higher interest rate induces people to

Accepted Answer

A)  save more, so the supply of loanable funds slopes upward. 
B)  save less, so the supply of loanable funds slopes downward. 
C)  invest more, so the supply of loanable funds slopes upward. 
D)  invest less, so the supply of loanable funds slopes downward. 
A)  save more, so the supply of loanable funds slopes upward. 
B)  save less, so the supply of loanable funds slopes downward. 
C)  invest more, so the supply of loanable funds slopes upward. 
D)  invest less, so the supply of loanable funds slopes downward.

Question 12

We would expect the interest rate on Bond A to be higher than the interest rate on Bond B if the two bonds have identical characteristics except that

Accepted Answer

A)  the credit risk associated with Bond A is lower than the credit risk associated with Bond B. 
B)  Bond A was issued by the city of Philadelphia and Bond B was issued by Red Hat Corporation. 
C)  Bond A has a term of 20 years and Bond B has a term of 2 years. 
D)  All of the above are correct. 
A)  the credit risk associated with Bond A is lower than the credit risk associated with Bond B. 
B)  Bond A was issued by the city of Philadelphia and Bond B was issued by Red Hat Corporation. 
C)  Bond A has a term of 20 years and Bond B has a term of 2 years. 
D)  All of the above are correct.

Question 13

Figure 26-4. On the horizontal axis of the graph, L represents the quantity of loanable funds in billions of dollars.  
-Refer to Figure 26-4. If the equilibrium quantity of loanable funds is $56 billion and if the rate of inflation is 5 percent, then the equilibrium nominal interest rate is

Accepted Answer

A)  11 percent. 
B)  approximately 6 percent. 
C)  between 6 percent and 8 percent. 
D)  between 11 percent and 13 percent. 
A)  11 percent. 
B)  approximately 6 percent. 
C)  between 6 percent and 8 percent. 
D)  between 11 percent and 13 percent.

Question 14

For an economy that engages in international trade, GDP is divided into four components. Which of the following items is not one of those components?

Accepted Answer

A)  consumption. 
B)  national saving. 
C)  government purchases. 
D)  net exports. 
A)  consumption. 
B)  national saving. 
C)  government purchases. 
D)  net exports.

Question 15

Banks and mutual funds are examples of financial markets.

Accepted Answer

A) True 
 B)False

Question 16

Higher education subsidies in the form of the federal government's student loan program

Accepted Answer

A)  induce more people to attend colleges and universities. 
B)  keep interest rates low on student loans. 
C)  cause lenders to take on more risk. 
D)  All of the above are correct. 
A)  induce more people to attend colleges and universities. 
B)  keep interest rates low on student loans. 
C)  cause lenders to take on more risk. 
D)  All of the above are correct.

Question 17

The slope of the demand for loanable funds curve represents the

Accepted Answer

A)  positive relation between the real interest rate and investment. 
B)  negative relation between the real interest rate and investment. 
C)  positive relation between the real interest rate and saving. 
D)  negative relation between the real interest rate and saving. 
A)  positive relation between the real interest rate and investment. 
B)  negative relation between the real interest rate and investment. 
C)  positive relation between the real interest rate and saving. 
D)  negative relation between the real interest rate and saving.

Question 18

The income that households have left after paying their taxes and paying for their consumption is known as .

Accepted Answer

The answer of The income that households have left after...

Question 19

A corporation's earnings are

Accepted Answer

A)  the amount of revenue it receives for the sale of its products minus its costs of production as measured by its accountants minus the dividends paid out. 
B)  the amount of revenue it receives for the sale of its products minus its direct and indirect costs of production as measured by its economists minus the dividends paid out. 
C)  the amount of revenue it receives for the sale of its products minus its costs of production as measured by its accountants. 
D)  the amount of revenue it receives for the sale of its products minus its direct and indirect costs of production as measured by its economists. 
A)  the amount of revenue it receives for the sale of its products minus its costs of production as measured by its accountants minus the dividends paid out. 
B)  the amount of revenue it receives for the sale of its products minus its direct and indirect costs of production as measured by its economists minus the dividends paid out. 
C)  the amount of revenue it receives for the sale of its products minus its costs of production as measured by its accountants. 
D)  the amount of revenue it receives for the sale of its products minus its direct and indirect costs of production as measured by its economists.

Question 20

What is the main function of the financial system?

Accepted Answer

Matching s

When tax code changes increase saving incentives, the interest rate will and investment will .

If the government instituted an investment tax credit, then which of the following would be higher in equilibrium?

Bay City Mining, Inc. has a price of $20 a share, outstanding shares of 2.5 million, retained earnings of $1 million dollars, and a dividend yield of 2 percent. It has a price-earnings ratio of

Scenario 26-1. Assume the following information for an imaginary, closed economy. GDP = $100,000; taxes = $22,000; government purchases = $25,000; national saving = $15,000. -Refer to Scenario 26-1. This economy's government is running a

XDF Corporation had a P/E ratio of 25, earnings per share of $4, and retained earnings per share of $3. What was its dividend yield?

If the tax rate fell, holding municipal bonds would be less desirable so the interest rates on them would fall.

Which of the following could explain a decrease in the equilibrium interest rate and an increase in the equilibrium quantity of loanable funds?

The financial system coordinates investment and saving, which are important determinants of long-run real GDP.

Suppose that in a closed economy GDP is 11,000, consumption is 7,500, and taxes are 500. What value of government purchases would make national savings equal to 2,000 and at that value would the government have a deficit or surplus?

An increase in the quantity of loanable funds traded means that

Other things the same, a higher interest rate induces people to

We would expect the interest rate on Bond A to be higher than the interest rate on Bond B if the two bonds have identical characteristics except that

Figure 26-4. On the horizontal axis of the graph, L represents the quantity of loanable funds in billions of dollars. -Refer to Figure 26-4. If the equilibrium quantity of loanable funds is $56 billion and if the rate of inflation is 5 percent, then the equilibrium nominal interest rate is

For an economy that engages in international trade, GDP is divided into four components. Which of the following items is not one of those components?

Banks and mutual funds are examples of financial markets.

Higher education subsidies in the form of the federal government's student loan program

The slope of the demand for loanable funds curve represents the

The income that households have left after paying their taxes and paying for their consumption is known as .

A corporation's earnings are

What is the main function of the financial system?

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

When tax code changes increase saving incentives, the interest rate will and investment will .

If the government instituted an investment tax credit, then which of the following would be higher in equilibrium?

Bay City Mining, Inc. has a price of $20 a share, outstanding shares of 2.5 million, retained earnings of $1 million dollars, and a dividend yield of 2 percent. It has a price-earnings ratio of

Scenario 26-1. Assume the following information for an imaginary, closed economy. GDP = $100,000; taxes = $22,000; government purchases = $25,000; national saving = $15,000. -Refer to Scenario 26-1. This economy's government is running a

XDF Corporation had a P/E ratio of 25, earnings per share of $4, and retained earnings per share of $3. What was its dividend yield?

If the tax rate fell, holding municipal bonds would be less desirable so the interest rates on them would fall.

Which of the following could explain a decrease in the equilibrium interest rate and an increase in the equilibrium quantity of loanable funds?

The financial system coordinates investment and saving, which are important determinants of long-run real GDP.

Suppose that in a closed economy GDP is 11,000, consumption is 7,500, and taxes are 500. What value of government purchases would make national savings equal to 2,000 and at that value would the government have a deficit or surplus?

An increase in the quantity of loanable funds traded means that

Other things the same, a higher interest rate induces people to

We would expect the interest rate on Bond A to be higher than the interest rate on Bond B if the two bonds have identical characteristics except that

Figure 26-4. On the horizontal axis of the graph, L represents the quantity of loanable funds in billions of dollars. -Refer to Figure 26-4. If the equilibrium quantity of loanable funds is $56 billion and if the rate of inflation is 5 percent, then the equilibrium nominal interest rate is

For an economy that engages in international trade, GDP is divided into four components. Which of the following items is not one of those components?

Banks and mutual funds are examples of financial markets.

Higher education subsidies in the form of the federal government's student loan program

The slope of the demand for loanable funds curve represents the

The income that households have left after paying their taxes and paying for their consumption is known as .

A corporation's earnings are

What is the main function of the financial system?

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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