Question 1

If the government's expenditures exceeded its receipts, it would likely

Accepted Answer

A)  lend money to a bank or other financial intermediary. 
B)  borrow money from a bank or other financial intermediary. 
C)  buy bonds directly from the public. 
D)  sell bonds directly to the public. 
A)  lend money to a bank or other financial intermediary. 
B)  borrow money from a bank or other financial intermediary. 
C)  buy bonds directly from the public. 
D)  sell bonds directly to the public.

Question 2

The primary advantage of mutual funds is that they

Accepted Answer

A)  always make a return that "beats the market." 
B)  allow people with small amounts of money to diversify. 
C)  provide customers with a medium of exchange. 
D)  All of the above are correct. 
A)  always make a return that "beats the market." 
B)  allow people with small amounts of money to diversify. 
C)  provide customers with a medium of exchange. 
D)  All of the above are correct.

Question 3

Suppose the economy is closed and consumption is 8 million, taxes are 2 million, and government purchases are 1.75 million. If national saving amounts to 1.25 million, then what is GDP?

Accepted Answer

A)  9 million. 
B)  9.5 million. 
C)  13 million. 
D)  11 million. 
A)  9 million. 
B)  9.5 million. 
C)  13 million. 
D)  11 million.

Question 4

Suppose a country has a larger increase in debt in 2014 than it had in 2013. Then other things the same,

Accepted Answer

A)  the supply of loanable funds shifts rightward and the interest rate falls. 
B)  the supply of loanable funds shifts leftward and the interest rate rises. 
C)  the demand for loanable funds shifts leftward and the interest rate falls. 
D)  the demand for loanable funds shifts rightward and the interest rate rises. 
A)  the supply of loanable funds shifts rightward and the interest rate falls. 
B)  the supply of loanable funds shifts leftward and the interest rate rises. 
C)  the demand for loanable funds shifts leftward and the interest rate falls. 
D)  the demand for loanable funds shifts rightward and the interest rate rises.

Question 5

Lenders buy bonds and borrowers sell them.

Accepted Answer

A) True 
 B)False

Question 6

Suppose the Congress and president decreased the maximum annual contributions limits to retirement accounts and at the same time reduced the budget deficit. What would happen to the interest rate?

Accepted Answer

A)  It would decrease. 
B)  It would increase. 
C)  It would stay the same. 
D)  It might do any of the above. 
A)  It would decrease. 
B)  It would increase. 
C)  It would stay the same. 
D)  It might do any of the above.

Question 7

In a closed economy, investment must be equal to private saving.

Accepted Answer

A) True 
 B)False

Question 8

In macroeconomics, refers to the purchase of new capital.

Accepted Answer

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

Question 9

Using a graph representing the market for loanable funds, show and explain what happens to interest rates and investment if the government budget goes from a deficit to a surplus.

Accepted Answer

As shown in the graph below, the economy

Question 10

Potential buyers of ABC Corporation bonds are concerned about ABC Corporation declaring bankruptcy. Potential buyers of XYZ Corporation bonds are not concerned that XYZ Corporation may declare bankruptcy. Which of the following statements is correct?

Accepted Answer

A)  Other things equal, the interest rate on XYZ Corporation bonds will be high relative to the interest rate on ABC Corporation bonds. 
B)  An ABC Corporation bond must have a longer term than an XYZ Corporation. 
C)  XYZ Corporation bonds carry less default risk than do ABC Corporation bonds. 
D)  All of the above are correct. 
A)  Other things equal, the interest rate on XYZ Corporation bonds will be high relative to the interest rate on ABC Corporation bonds. 
B)  An ABC Corporation bond must have a longer term than an XYZ Corporation. 
C)  XYZ Corporation bonds carry less default risk than do ABC Corporation bonds. 
D)  All of the above are correct.

Question 11

Other things the same, an increase in the interest rate

Accepted Answer

A)  would shift the demand for loanable funds to the right. 
B)  would shift the demand for loanable funds to the left. 
C)  would increase the quantity of loanable funds demanded. 
D)  would decrease the quantity of loanable funds demanded. 
A)  would shift the demand for loanable funds to the right. 
B)  would shift the demand for loanable funds to the left. 
C)  would increase the quantity of loanable funds demanded. 
D)  would decrease the quantity of loanable funds demanded.

Question 12

Banks and mutual funds are examples of financial markets.

Accepted Answer

A) True 
 B)False

Question 13

Bountiful Tractors has a share price of $60, retained earnings of $2 per share, and a dividend yield of 2 percent. What is Bountiful Tractor's price­earnings ratio?

Accepted Answer

A)  23.1 
B)  18.75 
C)  15 
D)  30 
A)  23.1 
B)  18.75 
C)  15 
D)  30

Question 14

A larger budget deficit

Accepted Answer

A)  raises the interest rate and investment. 
B)  reduces the interest rate and investment. 
C)  raises the interest rate and reduces investment. 
D)  reduces the interest rate and raises investment. 
A)  raises the interest rate and investment. 
B)  reduces the interest rate and investment. 
C)  raises the interest rate and reduces investment. 
D)  reduces the interest rate and raises investment.

Question 15

A does not engage in international trade in goods and services and it does not engage in international borrowing and lending.

Accepted Answer

The answer of A does not engage in international trade...

Question 16

In the market for loanable funds, the interaction of the demand for, and supply of, loanable funds determines the equilibrium level of

Accepted Answer

A)  the inflation rate. 
B)  gross domestic product. 
C)  the real interest rate. 
D)  the nominal interest rate. 
A)  the inflation rate. 
B)  gross domestic product. 
C)  the real interest rate. 
D)  the nominal interest rate.

Question 17

A bond is a

Accepted Answer

A)  financial intermediary. 
B)  certificate of indebtedness. 
C)  certificate of partial ownership in an enterprise. 
D)  None of the above is correct. 
A)  financial intermediary. 
B)  certificate of indebtedness. 
C)  certificate of partial ownership in an enterprise. 
D)  None of the above is correct.

Question 18

Queen City Sausage stock is selling at $40 per share, it has retained earnings of $1.00 per share, and dividends of $1.00 per share. What is the price-earnings ratio and what is the dividend yield?

Accepted Answer

A)  20, 2.5 percent. 
B)  20, 5 percent. 
C)  40, 2.5 percent. 
D)  40, 5 percent. 
A)  20, 2.5 percent. 
B)  20, 5 percent. 
C)  40, 2.5 percent. 
D)  40, 5 percent.

Question 19

If federal tax rates increased, what would happen to the interest rate on municipal bonds?

Accepted Answer

the intere

Question 20

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.

Exam 13: Saving, Investment, and the Financial System

If the government's expenditures exceeded its receipts, it would likely

The primary advantage of mutual funds is that they

Suppose the economy is closed and consumption is 8 million, taxes are 2 million, and government purchases are 1.75 million. If national saving amounts to 1.25 million, then what is GDP?

Suppose a country has a larger increase in debt in 2014 than it had in 2013. Then other things the same,

Lenders buy bonds and borrowers sell them.

Suppose the Congress and president decreased the maximum annual contributions limits to retirement accounts and at the same time reduced the budget deficit. What would happen to the interest rate?

In a closed economy, investment must be equal to private saving.

In macroeconomics, refers to the purchase of new capital.

Using a graph representing the market for loanable funds, show and explain what happens to interest rates and investment if the government budget goes from a deficit to a surplus.

Potential buyers of ABC Corporation bonds are concerned about ABC Corporation declaring bankruptcy. Potential buyers of XYZ Corporation bonds are not concerned that XYZ Corporation may declare bankruptcy. Which of the following statements is correct?

Other things the same, an increase in the interest rate

Banks and mutual funds are examples of financial markets.

Bountiful Tractors has a share price of $60, retained earnings of $2 per share, and a dividend yield of 2 percent. What is Bountiful Tractor's price­earnings ratio?

A larger budget deficit

A does not engage in international trade in goods and services and it does not engage in international borrowing and lending.

In the market for loanable funds, the interaction of the demand for, and supply of, loanable funds determines the equilibrium level of

A bond is a

Queen City Sausage stock is selling at $40 per share, it has retained earnings of $1.00 per share, and dividends of $1.00 per share. What is the price-earnings ratio and what is the dividend yield?

If federal tax rates increased, what would happen to the interest rate on municipal bonds?

When the government has a budget surplus

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

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Bountiful Tractors has a share price of $60, retained earnings of $2 per share, and a dividend yield of 2 percent. What is Bountiful Tractor's priceearnings ratio?