Exam 13: Saving, Investment, and the Financial System

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. For this economy, investment amounts to

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

Which of the following would necessarily create a surplus at the original equilibrium interest rate in the loanable funds market?

Which of the following is a financial-market transaction?

An increase in the budget deficit would cause a

Other things the same, which bond would you expect to pay the lowest interest rate?

The country of Growpaw does not trade with any other country. Its GDP is $20 billion. Its government purchases $3 billion worth of goods and services each year, collects $4 billion in taxes, and provides $2 billion in transfer payments to households. Private saving in Growpaw is $4 billion. What is investment in Growpaw?

At the broadest level, the financial system moves the economy's scarce resources from

Credit risk refers to the probability that the issuer of a bond will fail to pay some or all of the interest or principal.

Other things the same, an increase in taxes with no change in government purchases makes national saving

Skyline Chili wants to finance the purchase of new equipment for its restaurants. The firm has limited internal funds, so Skyline likely will

A U.S. Treasury bond is a

Which of the following statements is correct?

The ratio of government debt to GDP was higher during the Reagan presidency than at any previous time in U.S. history.

Other things the same, the higher the rate of saving and investment in a country, the higher will be the standard of living in the future.

By definition, equity finance

The slope of the supply of loanable funds curve represents the

If in a closed economy Y = $11 trillion, which of the following combinations would be consistent with national saving of $3 trillion?

Anything other than a change in the interest rate that decreases national saving shifts the supply of loanable funds to the left.

If Canada goes from a large budget deficit to a small budget deficit, it will