Question 1

Other things the same, if the government increases transfer payments to households, then the effect of this on the government's budget

Accepted Answer

A)  will make investment rise. 
B)  will make the rate of interest rise. 
C)  will make public saving rise. 
D)  All of the above are correct. 
A)  will make investment rise. 
B)  will make the rate of interest rise. 
C)  will make public saving rise. 
D)  All of the above are correct.

Question 2

The assumption of a closed economy

Accepted Answer

A)  applies to the world economy. 
B)  applies to most national economies. 
C)  requires us to assume that the government's budget is always balanced. 
D)  All of the above are correct. 
A)  applies to the world economy. 
B)  applies to most national economies. 
C)  requires us to assume that the government's budget is always balanced. 
D)  All of the above are correct.

Question 3

In a closed economy taxes are $750 billion, government transfers are $400 billion, government expenditures are $500 billion, and investment is $400 billion. What are private saving, public saving and national saving?

Accepted Answer

Private saving is $550 billion

Question 4

If we were to change the interpretation of the term "loanable funds" in such a way that government budget deficits would affect the demand for loanable funds, rather than the supply of loanable funds, then

Accepted Answer

A)  crowding out would not be a consequence of an increase in the budget deficit. 
B)  higher interest rates would not be a consequence of an increase in the budget deficit. 
C)  an increase in the budget deficit would cause the demand for loanable funds to decrease. 
D)  we would be making only a semantic change in how we analyze the effects of government budget deficits. 
A)  crowding out would not be a consequence of an increase in the budget deficit. 
B)  higher interest rates would not be a consequence of an increase in the budget deficit. 
C)  an increase in the budget deficit would cause the demand for loanable funds to decrease. 
D)  we would be making only a semantic change in how we analyze the effects of government budget deficits.

Question 5

What would happen in the market for loanable funds if the government were to increase the tax on interest income?

Accepted Answer

A)  The supply of loanable funds would shift right. 
B)  The demand for loanable funds would shift right. 
C)  The supply of loanable funds would shift left. 
D)  The demand for loanable funds would shift left. 
A)  The supply of loanable funds would shift right. 
B)  The demand for loanable funds would shift right. 
C)  The supply of loanable funds would shift left. 
D)  The demand for loanable funds would shift left.

Question 6

Two of the economy's most important financial intermediaries are

Accepted Answer

A)  suppliers of funds and demanders of funds. 
B)  banks and the bond market. 
C)  the stock market and the bond market. 
D)  banks and mutual funds. 
A)  suppliers of funds and demanders of funds. 
B)  banks and the bond market. 
C)  the stock market and the bond market. 
D)  banks and mutual funds.

Question 7

Because of differences in tax treatment, municipal bonds pay a higher interest rate than do corporate bonds.

Accepted Answer

A) True 
 B)False

Question 8

The economy's two most important financial markets are

Accepted Answer

A)  the investment market and the saving market. 
B)  the bond market and the stock market. 
C)  banks and the stock market. 
D)  financial markets and financial institutions. 
A)  the investment market and the saving market. 
B)  the bond market and the stock market. 
C)  banks and the stock market. 
D)  financial markets and financial institutions.

Question 9

A creditor of a corporation holds

Accepted Answer

A)  bonds sold by the corporation. If the corporation experiences financial difficulties stock holders are paid before bond holders. 
B)  bonds sold by the corporation. If the corporation experiences financial difficulties bond holders are paid before stock holders. 
C)  stocks sold by the corporation. If the corporation experiences financial difficulties stock holders are paid before bond holders. 
D)  stocks sold by the corporation. If the corporation experiences financial difficulties bond holders are paid before stock holders. 
A)  bonds sold by the corporation. If the corporation experiences financial difficulties stock holders are paid before bond holders. 
B)  bonds sold by the corporation. If the corporation experiences financial difficulties bond holders are paid before stock holders. 
C)  stocks sold by the corporation. If the corporation experiences financial difficulties stock holders are paid before bond holders. 
D)  stocks sold by the corporation. If the corporation experiences financial difficulties bond holders are paid before stock holders.

Question 10

How do banks make profits?

Accepted Answer

They charge borrower

Question 11

If a firm sells a total of 100 shares of stock, then

Accepted Answer

A)  each share represents 1 percent of the firm's indebtedness. 
B)  each share represents ownership of 1 percent of the firm. 
C)  the firm is engaging in term finance. 
D)  All of the above are correct. 
A)  each share represents 1 percent of the firm's indebtedness. 
B)  each share represents ownership of 1 percent of the firm. 
C)  the firm is engaging in term finance. 
D)  All of the above are correct.

Question 12

When the government has a budget surplus

Accepted Answer

A)  it buys more of its bonds from the public than it sells to the public. 
B)  it spends more than it receives in tax revenue. 
C)  private saving is greater than zero. 
D)  exports are greater than imports. 
A)  it buys more of its bonds from the public than it sells to the public. 
B)  it spends more than it receives in tax revenue. 
C)  private saving is greater than zero. 
D)  exports are greater than imports.

Question 13

If the inflation rate is 2 percent and the real interest rate is 7 percent, then the nominal interest rate is

Accepted Answer

A)  3.5 percent. 
B)  5 percent. 
C)  9 percent 
D)  7 percent. 
A)  3.5 percent. 
B)  5 percent. 
C)  9 percent 
D)  7 percent.

Question 14

Suppose a country has a consumption tax that is similar to a state sales tax. If its government were to eliminate the consumption tax and replace it with an income tax that includes an income tax on interest from savings, what would happen?

Accepted Answer

A)  There would be no change in the interest rate or saving. 
B)  The interest rate would decrease and saving would increase. 
C)  The interest rate would increase and saving would decrease. 
D)  None of the above is correct. 
A)  There would be no change in the interest rate or saving. 
B)  The interest rate would decrease and saving would increase. 
C)  The interest rate would increase and saving would decrease. 
D)  None of the above is correct.

Question 15

Fran buys 1,000 shares of stock issued by Miller Brewing. In turn, Miller uses the funds to buy new machinery for one of its breweries.

Accepted Answer

A)  Fran and Miller are both investing. 
B)  Fran and Miller are both saving. 
C)  Fran is investing; Miller is saving. 
D)  Fran is saving; Miller is investing. 
A)  Fran and Miller are both investing. 
B)  Fran and Miller are both saving. 
C)  Fran is investing; Miller is saving. 
D)  Fran is saving; Miller is investing.

Question 16

Which of the following equations will always represent GDP in an open economy?

Accepted Answer

A)  S = I - G 
B)  I = Y - C + G 
C)  Y = C + I + G 
D)  Y = C + I + G + NX 
A)  S = I - G 
B)  I = Y - C + G 
C)  Y = C + I + G 
D)  Y = C + I + G + NX

Question 17

National saving

Accepted Answer

A)  is the total income in the economy that remains after paying for consumption. 
B)  is the total income in the economy that remains after paying for consumption and government purchases. 
C)  is always greater than investment for a closed economy. 
D)  is equal to private saving minus public saving. 
A)  is the total income in the economy that remains after paying for consumption. 
B)  is the total income in the economy that remains after paying for consumption and government purchases. 
C)  is always greater than investment for a closed economy. 
D)  is equal to private saving minus public saving.

Question 18

Which of the following would shift the demand for loanable funds to the right?

Accepted Answer

A)  income tax increases 
B)  government expenditures increase 
C)  the interest rate falls 
D)  Congress and the president pass an investment tax credit 
A)  income tax increases 
B)  government expenditures increase 
C)  the interest rate falls 
D)  Congress and the president pass an investment tax credit

Question 19

If Congress instituted an investment tax credit, the equilibrium quantity of loanable funds would

Accepted Answer

A)  rise. 
B)  fall. 
C)  be unchanged. 
D)  move in an uncertain direction. 
A)  rise. 
B)  fall. 
C)  be unchanged. 
D)  move in an uncertain direction.

Question 20

Net exports must equal zero for any economy

Accepted Answer

A)  that is closed. 
B)  for which Y = C + I + G. 
C)  for which S = Y - C - G. 
D)  All of the above are correct. 
A)  that is closed. 
B)  for which Y = C + I + G. 
C)  for which S = Y - C - G. 
D)  All of the above are correct.

Other things the same, if the government increases transfer payments to households, then the effect of this on the government's budget

The assumption of a closed economy

In a closed economy taxes are $750 billion, government transfers are $400 billion, government expenditures are $500 billion, and investment is $400 billion. What are private saving, public saving and national saving?

If we were to change the interpretation of the term "loanable funds" in such a way that government budget deficits would affect the demand for loanable funds, rather than the supply of loanable funds, then

What would happen in the market for loanable funds if the government were to increase the tax on interest income?

Two of the economy's most important financial intermediaries are

Because of differences in tax treatment, municipal bonds pay a higher interest rate than do corporate bonds.

The economy's two most important financial markets are

A creditor of a corporation holds

How do banks make profits?

If a firm sells a total of 100 shares of stock, then

When the government has a budget surplus

If the inflation rate is 2 percent and the real interest rate is 7 percent, then the nominal interest rate is

Suppose a country has a consumption tax that is similar to a state sales tax. If its government were to eliminate the consumption tax and replace it with an income tax that includes an income tax on interest from savings, what would happen?

Fran buys 1,000 shares of stock issued by Miller Brewing. In turn, Miller uses the funds to buy new machinery for one of its breweries.

Which of the following equations will always represent GDP in an open economy?

National saving

Which of the following would shift the demand for loanable funds to the right?

If Congress instituted an investment tax credit, the equilibrium quantity of loanable funds would

Net exports must equal zero for any economy

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

Other things the same, if the government increases transfer payments to households, then the effect of this on the government's budget

The assumption of a closed economy

In a closed economy taxes are $750 billion, government transfers are $400 billion, government expenditures are $500 billion, and investment is $400 billion. What are private saving, public saving and national saving?

If we were to change the interpretation of the term "loanable funds" in such a way that government budget deficits would affect the demand for loanable funds, rather than the supply of loanable funds, then

What would happen in the market for loanable funds if the government were to increase the tax on interest income?

Two of the economy's most important financial intermediaries are

Because of differences in tax treatment, municipal bonds pay a higher interest rate than do corporate bonds.

The economy's two most important financial markets are

A creditor of a corporation holds

How do banks make profits?

If a firm sells a total of 100 shares of stock, then

When the government has a budget surplus

If the inflation rate is 2 percent and the real interest rate is 7 percent, then the nominal interest rate is

Suppose a country has a consumption tax that is similar to a state sales tax. If its government were to eliminate the consumption tax and replace it with an income tax that includes an income tax on interest from savings, what would happen?

Fran buys 1,000 shares of stock issued by Miller Brewing. In turn, Miller uses the funds to buy new machinery for one of its breweries.

Which of the following equations will always represent GDP in an open economy?

National saving

Which of the following would shift the demand for loanable funds to the right?

If Congress instituted an investment tax credit, the equilibrium quantity of loanable funds would

Net exports must equal zero for any economy

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