Question 1

In a closed economy, if taxes fall and consumption rises, then private saving must fall.

Accepted Answer

A) True 
 B)False

Question 2

The two most important financial markets are the _____ market and the _____ market.

Accepted Answer

bond, stoc

Question 3

In a closed economy, what does T - G) represent?

Accepted Answer

A)  national saving 
B)  investment 
C)  private saving 
D)  public saving 
A)  national saving 
B)  investment 
C)  private saving 
D)  public saving

Question 4

Suppose a country has only a sales tax. Now suppose it replaces the sales tax with an income tax that includes a tax on interest income. This would make equilibrium

Accepted Answer

A)  interest rates and the equilibrium quantity of loanable funds rise. 
B)  interest rates rise and the equilibrium quantity of loanable funds fall. 
C)  interest rates fall and the equilibrium quantity of loanable funds rise. 
D)  interest rates and the equilibrium quantity of loanable funds fall. 
A)  interest rates and the equilibrium quantity of loanable funds rise. 
B)  interest rates rise and the equilibrium quantity of loanable funds fall. 
C)  interest rates fall and the equilibrium quantity of loanable funds rise. 
D)  interest rates and the equilibrium quantity of loanable funds fall.

Question 5

Which of the following restrictions implies that saving and investment are equal for a closed economy?

Accepted Answer

A)  Private saving is equal to zero. 
B)  Public saving is equal to zero. 
C)  The economy's government is running neither a surplus nor a deficit. 
D)  No restriction is necessary; saving and investment are equal for all closed economies. 
A)  Private saving is equal to zero. 
B)  Public saving is equal to zero. 
C)  The economy's government is running neither a surplus nor a deficit. 
D)  No restriction is necessary; saving and investment are equal for all closed economies.

Question 6

When tax code changes increase investment incentives, the _____ for loanable funds curve shifts to the _____. This results in an) _____ in the interest rate and an) _____ in investment.

Accepted Answer

demand, ri

Question 7

Figure 26-3. The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves.  
-Refer to Figure 26-3. A shift of the demand curve from D1 to D2 is called

Accepted Answer

A)  an increase in the demand for loanable funds, and that increase would originate from people who had some extra income they wanted to lend. 
B)  an increase in the demand for loanable funds, and that increase would originate from households and firms who wish to borrow to make investments. 
C)  a decrease in the demand for loanable funds, and that decrease would originate from people who had some extra income they wanted to lend. 
D)  a decrease in the demand for loanable funds, and that decrease would originate from households and firms who wish to borrow to make investments. 
A)  an increase in the demand for loanable funds, and that increase would originate from people who had some extra income they wanted to lend. 
B)  an increase in the demand for loanable funds, and that increase would originate from households and firms who wish to borrow to make investments. 
C)  a decrease in the demand for loanable funds, and that decrease would originate from people who had some extra income they wanted to lend. 
D)  a decrease in the demand for loanable funds, and that decrease would originate from households and firms who wish to borrow to make investments.

Question 8

All or part of a firm's profits may be paid out to the firm's stockholders in the form of

Accepted Answer

A)  retained earnings. 
B)  dividends. 
C)  interest payments. 
D)  capital accounts. 
A)  retained earnings. 
B)  dividends. 
C)  interest payments. 
D)  capital accounts.

Question 9

Suppose the government finds a major defect in one of a company's products and demands that the product be taken off the market. We would expect that the

Accepted Answer

A)  supply of existing shares of the stock and the price will both rise. 
B)  supply of existing shares of the stock and the price will both fall. 
C)  demand for existing shares of the stock and the price will both rise. 
D)  demand for existing shares of the stock and the price will both fall. 
A)  supply of existing shares of the stock and the price will both rise. 
B)  supply of existing shares of the stock and the price will both fall. 
C)  demand for existing shares of the stock and the price will both rise. 
D)  demand for existing shares of the stock and the price will both fall.

Question 10

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

Accepted Answer

A)  raise both private and public saving. 
B)  raise private saving and lower public saving. 
C)  lower private saving and raise public saving. 
D)  lower private and public saving. 
A)  raise both private and public saving. 
B)  raise private saving and lower public saving. 
C)  lower private saving and raise public saving. 
D)  lower private and public saving.

Question 11

Suppose a small closed economy has GDP of $5 billion, consumption of $3 billion, and government expenditures of $1 billion. Then investment and national saving are both $1 billion.

Accepted Answer

A) True 
 B)False

Question 12

When a country saves a larger portion of its GDP than it did before, it will have

Accepted Answer

A)  more capital and higher productivity. 
B)  more capital and lower productivity. 
C)  less capital and higher productivity. 
D)  less capital and lower productivity. 
A)  more capital and higher productivity. 
B)  more capital and lower productivity. 
C)  less capital and higher productivity. 
D)  less capital and lower productivity.

Question 13

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

Accepted Answer

A)  the interest it pays is taxed and it was issued by a financially strong corporation 
B)  the interest it pays is taxed and it was issued by a financially weak corporation 
C)  the interest it pays is tax exempt and it was issued by a financially strong corporation 
D)  the interest it pays is tax exempt and it was issued by a financially weak corporation 
A)  the interest it pays is taxed and it was issued by a financially strong corporation 
B)  the interest it pays is taxed and it was issued by a financially weak corporation 
C)  the interest it pays is tax exempt and it was issued by a financially strong corporation 
D)  the interest it pays is tax exempt and it was issued by a financially weak corporation

Question 14

In which case would people desire to borrow the most?

Accepted Answer

A)  the nominal interest rate is 8% and the inflation rate is 7% 
B)  the nominal interest rate is 7% and the inflation rate is 5% 
C)  the nominal interest rate is 6% and the inflation rate is 3% 
D)  the nominal interest rate is 5% and the inflation rate is 1% 
A)  the nominal interest rate is 8% and the inflation rate is 7% 
B)  the nominal interest rate is 7% and the inflation rate is 5% 
C)  the nominal interest rate is 6% and the inflation rate is 3% 
D)  the nominal interest rate is 5% and the inflation rate is 1%

Question 15

Use the following table to answer the following questions.
Table 26-2
  
-Refer to Table 26-2. Which company had the highest dollar dividend per share?

Accepted Answer

A)  Boeing Co. 
B)  Eli Lilly and Co. 
C)  Kraft Foods Group 
D)  Kellogg Co. 
A)  Boeing Co. 
B)  Eli Lilly and Co. 
C)  Kraft Foods Group 
D)  Kellogg Co.

Question 16

National saving is the sum of and . In a closed economy it is equal to in equilibrium.

Accepted Answer

private saving, publ

Question 17

Which of the following bond buyers did not buy the bond that best met his or her objective?

Accepted Answer

A)  Jackie wanted a bond with a high interest rate and was willing to take a lot of risk. She purchased a junk bond. 
B)  Andrew wanted a bond that would allow him to legally avoid paying federal income taxes. He purchased a municipal bond. 
C)  Suzy wanted to purchase a bond whose seller was unlikely to default. She purchased a bond that Standards and Poor's rated a low credit risk. 
D)  Cecilia held long-term bonds rather than short-term bonds to avoid risk. 
A)  Jackie wanted a bond with a high interest rate and was willing to take a lot of risk. She purchased a junk bond. 
B)  Andrew wanted a bond that would allow him to legally avoid paying federal income taxes. He purchased a municipal bond. 
C)  Suzy wanted to purchase a bond whose seller was unlikely to default. She purchased a bond that Standards and Poor's rated a low credit risk. 
D)  Cecilia held long-term bonds rather than short-term bonds to avoid risk.

Question 18

What happens to desired investment spending if the interest rate rises? Is this response relevant to the supply of loanable funds curve or the demand for loanable funds curve?

Accepted Answer

Investment spending

Question 19

Melinda buys new equipment for her dental office with funds she borrowed from a bank that raised funds from depositors. Which of the following is correct?

Accepted Answer

A)  Melinda is an investor. 
B)  The depositors are investors. 
C)  Both Melinda and the depositors are investors. 
D)  Neither Melinda nor the depositors are investors. 
A)  Melinda is an investor. 
B)  The depositors are investors. 
C)  Both Melinda and the depositors are investors. 
D)  Neither Melinda nor the depositors are investors.

Question 20

The country of Yokovia does not trade with any other country. Its GDP is $20 billion. Its government collects $2 billion in taxes. Consumption equals $15 billion and investment equals $2 billion. What is public saving in Yokovia, and what is the value of the goods and services purchased by the government of Yokovia?

Accepted Answer

A)  -$2 billion and $1 billion. 
B)  $1 billion and $1 billion. 
C)  -$1 billion and $3 billion. 
D)  -$2 billion and $3 billion. 
A)  -$2 billion and $1 billion. 
B)  $1 billion and $1 billion. 
C)  -$1 billion and $3 billion. 
D)  -$2 billion and $3 billion.

Exam 13: Saving, Investment, and the Financial System

In a closed economy, if taxes fall and consumption rises, then private saving must fall.

The two most important financial markets are the _____ market and the _____ market.

In a closed economy, what does T - G) represent?

Suppose a country has only a sales tax. Now suppose it replaces the sales tax with an income tax that includes a tax on interest income. This would make equilibrium

Which of the following restrictions implies that saving and investment are equal for a closed economy?

When tax code changes increase investment incentives, the _____ for loanable funds curve shifts to the _____. This results in an) _____ in the interest rate and an) _____ in investment.

Figure 26-3. The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves. -Refer to Figure 26-3. A shift of the demand curve from D1 to D2 is called

All or part of a firm's profits may be paid out to the firm's stockholders in the form of

Suppose the government finds a major defect in one of a company's products and demands that the product be taken off the market. We would expect that the

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

Suppose a small closed economy has GDP of $5 billion, consumption of $3 billion, and government expenditures of $1 billion. Then investment and national saving are both $1 billion.

When a country saves a larger portion of its GDP than it did before, it will have

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

In which case would people desire to borrow the most?

Use the following table to answer the following questions. Table 26-2 -Refer to Table 26-2. Which company had the highest dollar dividend per share?

National saving is the sum of and . In a closed economy it is equal to in equilibrium.

Which of the following bond buyers did not buy the bond that best met his or her objective?

What happens to desired investment spending if the interest rate rises? Is this response relevant to the supply of loanable funds curve or the demand for loanable funds curve?

Melinda buys new equipment for her dental office with funds she borrowed from a bank that raised funds from depositors. Which of the following is correct?

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

The two most important financial markets are the _ market and the _ market.

When tax code changes increase investment incentives, the ___ for loanable funds curve shifts to the _. This results in an) _ in the interest rate and an) ___ in investment.