Question 1

If national saving in a closed economy is greater than zero, which of the following must be true?

Accepted Answer

A)  Either public saving or private saving must be greater than zero. 
B)  Investment is positive. 
C)  Y - C - G > 0. 
D)  All of the above are correct. 
A)  Either public saving or private saving must be greater than zero. 
B)  Investment is positive. 
C)  Y - C - G > 0. 
D)  All of the above are correct.

Question 2

Robert buys bonds. Rachel buys a new truck for her landscaping business. Identify both as savers, investors, both, or neither.

Accepted Answer

Robert is

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

If Congress instituted an investment tax credit

Accepted Answer

A)  it would make buying bonds more desirable, so the demand for loanable funds would shift. 
B)  it would make buying capital goods more desirable, so the demand for loanable funds would shift. 
C)  it would make buying bonds more desirable, so the supply of loanable funds would shift. 
D)  it would make buying capital goods more desirable, so the supply of loanable funds would shift. 
A)  it would make buying bonds more desirable, so the demand for loanable funds would shift. 
B)  it would make buying capital goods more desirable, so the demand for loanable funds would shift. 
C)  it would make buying bonds more desirable, so the supply of loanable funds would shift. 
D)  it would make buying capital goods more desirable, so the supply of loanable funds would shift.

Question 5

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 6

Suppose a country repealed its investment tax credit. The effects of this are represented by shifting the

Accepted Answer

A)  demand for and the supply of loanable funds to the right. 
B)  demand for and the supply of loanable funds to the left. 
C)  supply of loanable funds to the right and the demand for loanable funds to the left. 
D)  None of the above is correct. 
A)  demand for and the supply of loanable funds to the right. 
B)  demand for and the supply of loanable funds to the left. 
C)  supply of loanable funds to the right and the demand for loanable funds to the left. 
D)  None of the above is correct.

Question 7

If there is a shortage of loanable funds, then

Accepted Answer

A)  the quantity of loanable funds demanded is greater than the quantity of loanable funds supplied and the interest rate is above equilibrium. 
B)  the quantity of loanable funds demanded is greater than the quantity of loanable funds supplied and the interest rate is below equilibrium. 
C)  the quantity of loanable funds supplied is greater than the quantity of loanable funds demanded and the interest rate is above equilibrium. 
D)  the quantity of loanable funds supplied is greater than the quantity of loanable funds demanded and the interest rate is below equilibrium. 
A)  the quantity of loanable funds demanded is greater than the quantity of loanable funds supplied and the interest rate is above equilibrium. 
B)  the quantity of loanable funds demanded is greater than the quantity of loanable funds supplied and the interest rate is below equilibrium. 
C)  the quantity of loanable funds supplied is greater than the quantity of loanable funds demanded and the interest rate is above equilibrium. 
D)  the quantity of loanable funds supplied is greater than the quantity of loanable funds demanded and the interest rate is below equilibrium.

Question 8

At some point during the financial crisis of 2008-2009, people with uninsured deposits at financial institutions withdrew money from their accounts at those institutions. This phenomenon characterized which element of the financial crisis?

Accepted Answer

A)  the decline in confidence in financial institutions 
B)  the credit crunch 
C)  the economic downturn 
D)  the decline in asset prices 
A)  the decline in confidence in financial institutions 
B)  the credit crunch 
C)  the economic downturn 
D)  the decline in asset prices

Question 9

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 10

National saving is equal to Y - T - C.

Accepted Answer

A) True 
 B)False

Question 11

Which advantages) do mutual funds claim to provide?

Accepted Answer

A)  diversification and access to the skills of professional money managers 
B)  diversification but not access to the skills of professional money managers 
C)  access to the skills of professional money managers but not diversification 
D)  neither diversification nor access to the skills of professional money managers. 
A)  diversification and access to the skills of professional money managers 
B)  diversification but not access to the skills of professional money managers 
C)  access to the skills of professional money managers but not diversification 
D)  neither diversification nor access to the skills of professional money managers.

Question 12

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 13

When the U.S. government is in debt during a given year, it follows that its budget is in deficit for that year.

Accepted Answer

A) True 
 B)False

Question 14

Camp Company had total earnings of $600 million in 2013, out of which it retained 20 percent for future investments. In 2013, its stock featured a dividend yield of 4 percent and 100 million shares were outstanding. The price-earnings ratio for Camp Company stock was

Accepted Answer

A)  5. 
B)  150. 
C)  20. 
D)  25. 
A)  5. 
B)  150. 
C)  20. 
D)  25.

Question 15

The Dow Jones Industrial Average has been computed regularly since

Accepted Answer

A)  1976. 
B)  1948. 
C)  1913. 
D)  1896. 
A)  1976. 
B)  1948. 
C)  1913. 
D)  1896.

Question 16

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

Accepted Answer

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

Question 17

Suppose that Congress were to institute an investment tax credit. What would happen in the market for loanable funds?

Accepted Answer

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

Question 18

If the Apple corporation sells a bond it is

Accepted Answer

A)  borrowing directly from the public. 
B)  borrowing indirectly from the public. 
C)  selling shares of ownership directly to the public. 
D)  selling shares of ownership indirectly to the public. 
A)  borrowing directly from the public. 
B)  borrowing indirectly from the public. 
C)  selling shares of ownership directly to the public. 
D)  selling shares of ownership indirectly to the public.

Question 19

Which of the following would both make the interest rate on a bond higher than otherwise?

Accepted Answer

A)  the interest it pays is taxed and it is long term 
B)  the interest it pays is taxed and it is short term 
C)  the interest it pays is tax exempt and it is long term 
D)  the interest it pays is tax exempt and it is short term 
A)  the interest it pays is taxed and it is long term 
B)  the interest it pays is taxed and it is short term 
C)  the interest it pays is tax exempt and it is long term 
D)  the interest it pays is tax exempt and it is short term

Question 20

In 2002 mortgage rates fell and mortgage lending increased. Which of the following could explain both of these changes?

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.

Exam 13: Saving, Investment, and the Financial System

If national saving in a closed economy is greater than zero, which of the following must be true?

Robert buys bonds. Rachel buys a new truck for her landscaping business. Identify both as savers, investors, both, or neither.

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

If Congress instituted an investment tax credit

A creditor of a corporation holds

Suppose a country repealed its investment tax credit. The effects of this are represented by shifting the

If there is a shortage of loanable funds, then

At some point during the financial crisis of 2008-2009, people with uninsured deposits at financial institutions withdrew money from their accounts at those institutions. This phenomenon characterized which element of the financial crisis?

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

National saving is equal to Y - T - C.

Which advantages) do mutual funds claim to provide?

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

When the U.S. government is in debt during a given year, it follows that its budget is in deficit for that year.

Camp Company had total earnings of $600 million in 2013, out of which it retained 20 percent for future investments. In 2013, its stock featured a dividend yield of 4 percent and 100 million shares were outstanding. The price-earnings ratio for Camp Company stock was

The Dow Jones Industrial Average has been computed regularly since

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

Suppose that Congress were to institute an investment tax credit. What would happen in the market for loanable funds?

If the Apple corporation sells a bond it is

Which of the following would both make the interest rate on a bond higher than otherwise?

In 2002 mortgage rates fell and mortgage lending increased. Which of the following could explain both of these changes?

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

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

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 Trade-Off Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

Filters

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