Question 1

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

Accepted Answer

A)  reduce the number of people that attend college. 
B)  reduce the number of universities and colleges in the future. 
C)  create a credit bubble and debt crisis. 
D)  reduce the default risk on student loans. 
A)  reduce the number of people that attend college. 
B)  reduce the number of universities and colleges in the future. 
C)  create a credit bubble and debt crisis. 
D)  reduce the default risk on student loans.

Question 2

What is a mutual fund?

Accepted Answer

An institution that sells shar

Question 3

The sale of stocks

Accepted Answer

A)  and bonds to raise money is called debt finance. 
B)  and bonds to raise money is called equity finance. 
C)  to raise money is called debt finance, while the sale of bonds to raise funds is called equity finance. 
D)  to raise money is called equity finance, while the sale of bonds to raise funds is called debt finance. 
A)  and bonds to raise money is called debt finance. 
B)  and bonds to raise money is called equity finance. 
C)  to raise money is called debt finance, while the sale of bonds to raise funds is called equity finance. 
D)  to raise money is called equity finance, while the sale of bonds to raise funds is called debt finance.

Question 4

The country of Bienmundo does not trade with any other country. Its GDP is $30 billion. Its government purchases $5 billion worth of goods and services each year and collects $6 billion in taxes. Private saving in Bienmundo amounts to $5 billion. What are consumption and investment in Bienmundo?

Accepted Answer

A)  $17 billion and $8 billion, respectively. 
B)  $19 billion and $6 billion, respectively. 
C)  $19 billion and $8 billion, respectively. 
D)  $17 billion and $6 billion, respectively. 
A)  $17 billion and $8 billion, respectively. 
B)  $19 billion and $6 billion, respectively. 
C)  $19 billion and $8 billion, respectively. 
D)  $17 billion and $6 billion, respectively.

Question 5

Scenario 26-2. Assume the following information for an imaginary, closed economy.
GDP = $5 trillion; consumption = $3.1 trillion; government purchases = $0.7 trillion; and taxes = $0.9 trillion.
-Refer to Scenario 26-2. Suppose, for this economy, the relationship between the real interest rate, r, and investment, I, is given by the equation I = 10.78 - 3.03r. If, for example, r = 10, this means that the real interest rate is 10 percent.) The equilibrium real interest rate for this economy is

Accepted Answer

A)  3.19 percent. 
B)  3.00 percent. 
C)  3.16 percent. 
D)  7.14 percent. 
A)  3.19 percent. 
B)  3.00 percent. 
C)  3.16 percent. 
D)  7.14 percent.

Question 6

A high price-earnings ratio for a stock indicates that either the stock is

Accepted Answer

A)  undervalued or people are relatively optimistic about the corporation's prospects. 
B)  overvalued or people are relatively optimistic about the corporation's prospects. 
C)  overvalued or people are relatively pessimistic about the corporation's prospects. 
D)  undervalued or people are relatively pessimistic about the corporation's prospects. 
A)  undervalued or people are relatively optimistic about the corporation's prospects. 
B)  overvalued or people are relatively optimistic about the corporation's prospects. 
C)  overvalued or people are relatively pessimistic about the corporation's prospects. 
D)  undervalued or people are relatively pessimistic about the corporation's prospects.

Question 7

In a closed economy, each unit of output is either consumed by households or invested.

Accepted Answer

A) True 
 B)False

Question 8

Joan uses some of her income to buy mutual fund shares. A macroeconomist refers to Joan's purchase as investment.

Accepted Answer

A) True 
 B)False

Question 9

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. Regard the position of the Supply curve as fixed, as on the graph. If the real interest rate is 8 percent, the inflation rate is 3 percent, and the market for loanable funds is in equilibrium, then the position of the demand-for-loanable-funds curve must be

Accepted Answer

A)  D1. 
B)  D2. 
C)  between D1 and D2. 
D)  to the right of D2. 
A)  D1. 
B)  D2. 
C)  between D1 and D2. 
D)  to the right of D2.

Question 10

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 11

If the demand for loanable funds shifts to the left, then the equilibrium interest rate

Accepted Answer

A)  and quantity of loanable funds rises. 
B)  and quantity of loanable funds falls. 
C)  rises and the quantity of loanable funds falls. 
D)  falls and the quantity of loanable funds rises. 
A)  and quantity of loanable funds rises. 
B)  and quantity of loanable funds falls. 
C)  rises and the quantity of loanable funds falls. 
D)  falls and the quantity of loanable funds rises.

Question 12

Use the following table to answer the following questions.
Table 26-1
  
-Refer to Table 26-1. In dollar terms, which company paid the highest dividend per share?

Accepted Answer

A)  GenMills 
B)  Microsoft 
C)  Graco 
D)  Hershey 
A)  GenMills 
B)  Microsoft 
C)  Graco 
D)  Hershey

Question 13

In macroeconomics, refers to the purchase of new capital.

Accepted Answer

The answer of In macroeconomics, refers to the purchase of...

Question 14

To state that national saving is equal to investment, for a closed economy, is to state an accounting identity.

Accepted Answer

A) True 
 B)False

Question 15

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 16

The supply of loanable funds would shift to the right if either

Accepted Answer

A)  tax reforms encouraged greater saving or the budget deficit became smaller. 
B)  tax reforms encouraged greater saving or investment tax credits were increased. 
C)  the budget deficit became larger or investment tax credits were increased. 
D)  the budget deficit became larger or tax reforms discouraged saving. 
A)  tax reforms encouraged greater saving or the budget deficit became smaller. 
B)  tax reforms encouraged greater saving or investment tax credits were increased. 
C)  the budget deficit became larger or investment tax credits were increased. 
D)  the budget deficit became larger or tax reforms discouraged saving.

Question 17

The term loanable funds refers to all income that is not used for consumption or government expenditures.

Accepted Answer

A) True 
 B)False

Question 18

A bond buyer is a

Accepted Answer

A)  saver. Bond buyers must hold their bonds until maturity. 
B)  saver. Bond buyers may sell their bonds prior to maturity. 
C)  borrower. Bond buyers must hold their bonds until maturity. 
D)  borrower. Bond buyers may sell their bonds prior to maturity. 
A)  saver. Bond buyers must hold their bonds until maturity. 
B)  saver. Bond buyers may sell their bonds prior to maturity. 
C)  borrower. Bond buyers must hold their bonds until maturity. 
D)  borrower. Bond buyers may sell their bonds prior to maturity.

Question 19

An increase in the budget deficit shifts the demand for loanable funds to the right.

Accepted Answer

A) True 
 B)False

Question 20

Financial intermediaries are

Accepted Answer

A)  the same as financial markets. 
B)  individuals who make profits by buying a stock low and selling it high. 
C)  a more general name for financial assets such as stocks, bonds, and checking accounts. 
D)  financial institutions through which savers can indirectly provide funds to borrowers. 
A)  the same as financial markets. 
B)  individuals who make profits by buying a stock low and selling it high. 
C)  a more general name for financial assets such as stocks, bonds, and checking accounts. 
D)  financial institutions through which savers can indirectly provide funds to borrowers.

Exam 18: Saving, Investment, and the Financial System

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

What is a mutual fund?

The sale of stocks

The country of Bienmundo does not trade with any other country. Its GDP is $30 billion. Its government purchases $5 billion worth of goods and services each year and collects $6 billion in taxes. Private saving in Bienmundo amounts to $5 billion. What are consumption and investment in Bienmundo?

A high price-earnings ratio for a stock indicates that either the stock is

In a closed economy, each unit of output is either consumed by households or invested.

Joan uses some of her income to buy mutual fund shares. A macroeconomist refers to Joan's purchase as investment.

Which of the following statements is correct?

If the demand for loanable funds shifts to the left, then the equilibrium interest rate

Use the following table to answer the following questions. Table 26-1 -Refer to Table 26-1. In dollar terms, which company paid the highest dividend per share?

In macroeconomics, refers to the purchase of new capital.

To state that national saving is equal to investment, for a closed economy, is to state an accounting identity.

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

The supply of loanable funds would shift to the right if either

The term loanable funds refers to all income that is not used for consumption or government expenditures.

A bond buyer is a

An increase in the budget deficit shifts the demand for loanable funds to the right.

Financial intermediaries are

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Application: The Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Costs of Production

Firms in Competitive Markets

Monopoly

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

The Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

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