Question 1

Which of the following is not an important stock exchange in the United States?

Accepted Answer

A)  New York Stock Exchange 
B)  American Stock Exchange 
C)  Chicago Mercantile Exchange 
D)  NASDAQ 
A)  New York Stock Exchange 
B)  American Stock Exchange 
C)  Chicago Mercantile Exchange 
D)  NASDAQ

Question 2

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

Accepted Answer

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

Question 3

It is claimed that a secondary advantage of mutual funds is that

Accepted Answer

A)  an investor can avoid investment charges and fees. 
B)  they give ordinary people access to loanable funds for investing. 
C)  they usually outperform stock market indexes. 
D)  they give ordinary people access to the skills of professional money managers. 
A)  an investor can avoid investment charges and fees. 
B)  they give ordinary people access to loanable funds for investing. 
C)  they usually outperform stock market indexes. 
D)  they give ordinary people access to the skills of professional money managers.

Question 4

Who accepts all of the risk associated with a mutual fund's portfolio of stocks and/or bonds?

Accepted Answer

A)  the fund's managers 
B)  the fund's shareholders 
C)  the federal government 
D)  the corporations that originally issued the stocks and/or bonds held by the fund 
A)  the fund's managers 
B)  the fund's shareholders 
C)  the federal government 
D)  the corporations that originally issued the stocks and/or bonds held by the fund

Question 5

In a closed economy private saving is $500 billion and the government budget deficit is $100 billion. What is investment?

Accepted Answer

The answer of In a closed economy private saving is...

Question 6

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 7

If an economy is closed and if it has no government, then

Accepted Answer

A)  national saving = private saving. 
B)  total income = consumption + investment. 
C)  saving = total income - consumption. 
D)  All of the above are correct. 
A)  national saving = private saving. 
B)  total income = consumption + investment. 
C)  saving = total income - consumption. 
D)  All of the above are correct.

Question 8

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 9

Longview Corporation has a stock price of $60, has issued 1,000,000 shares of stock, has retained earnings of $3 million dollars, and a dividend yield of 5 percent. The price-earnings ratio for Longview stock is

Accepted Answer

A)  20, which is high compared to historical standards of the market. 
B)  20, which is low compared to historical standards of the market. 
C)  10, which is low compared to historical standards of the market. 
D)  10, which is high compared to historical standards of the market. 
A)  20, which is high compared to historical standards of the market. 
B)  20, which is low compared to historical standards of the market. 
C)  10, which is low compared to historical standards of the market. 
D)  10, which is high compared to historical standards of the market.

Question 10

Which of the following statements is correct?

Accepted Answer

A)  NASDAQ is an important stock exchange in the United States. 
B)  The Standard & Poor's 500 Index and the New York Stock Exchange are two examples of stock indexes. 
C)  The most significant influence on the demand for a corporation's stock is the number of shares of the stock that the corporation has issued. 
D)  All of the above are correct. 
A)  NASDAQ is an important stock exchange in the United States. 
B)  The Standard & Poor's 500 Index and the New York Stock Exchange are two examples of stock indexes. 
C)  The most significant influence on the demand for a corporation's stock is the number of shares of the stock that the corporation has issued. 
D)  All of the above are correct.

Question 11

A higher interest rate makes more attractive. Therefore the quantity of loanable funds supplied increases.

Accepted Answer

The answer of A higher interest rate makes more attractive....

Question 12

Scenario 26-1. Assume the following information for an imaginary, closed economy.
GDP = $100,000; taxes = $22,000; government purchases = $25,000; national saving = $15,000.
-Refer to Scenario 26-1. For this economy, private saving amounts to

Accepted Answer

A)  $22,000. 
B)  $18,000. 
C)  $15,000. 
D)  $37,000. 
A)  $22,000. 
B)  $18,000. 
C)  $15,000. 
D)  $37,000.

Question 13

Suppose the government deficit increases, but the interest rate remains the same. Which of the following things might have happened simultaneously to keep interest rates the same?

Accepted Answer

A)  The government reduces the amount that people may put into savings accounts on which the interest is tax exempt. 
B)  Because they are optimistic about the future of the economy, firms desire to borrow more to purchase physical capital. 
C)  Consumers decide to decrease consumption and work more. 
D)  All of the above could explain why the interest rate would be unchanged. 
A)  The government reduces the amount that people may put into savings accounts on which the interest is tax exempt. 
B)  Because they are optimistic about the future of the economy, firms desire to borrow more to purchase physical capital. 
C)  Consumers decide to decrease consumption and work more. 
D)  All of the above could explain why the interest rate would be unchanged.

Question 14

Which of the following is not a nonsensical headline?

Accepted Answer

A)  British perpetuities about to mature. 
B)  Disney issues new bonds with term of 7 percent. 
C)  Corporate bonds currently pay higher interest rates than government bonds. 
D)  Standard and Poor's judges new junk bond to have very low credit risk. 
A)  British perpetuities about to mature. 
B)  Disney issues new bonds with term of 7 percent. 
C)  Corporate bonds currently pay higher interest rates than government bonds. 
D)  Standard and Poor's judges new junk bond to have very low credit risk.

Question 15

The bond market, the stock market, banks, pension funds, and insurance companies are all financial

Accepted Answer

A)  systems. 
B)  markets. 
C)  institutions. 
D)  intermediaries. 
A)  systems. 
B)  markets. 
C)  institutions. 
D)  intermediaries.

Question 16

Identify each of the following acts as representing either saving or investment.
a. Fred uses some of his income to buy government bonds.
b. Julie takes some of her income and buys mutual funds.
c. Alex purchases a new truck for his delivery business using borrowed funds.
d. Elaine uses some of her income to buy stock in a major corporation.
e. Henrietta hires a builder to construct a new building for her bicycle shop.

Accepted Answer

a. Fred is saving.
b. Julie is

Question 17

Generally, if people begin to expect a company to have higher future profits, the price of the company's stock will begin to decrease.

Accepted Answer

A) True 
 B)False

Question 18

When the government's budget deficit increases

Accepted Answer

A)  the government is borrowing less and public savings falls. 
B)  the government is borrowing less and public savings increases. 
C)  the government is borrowing more and public savings falls. 
D)  the government is borrowing more and public savings increases. 
A)  the government is borrowing less and public savings falls. 
B)  the government is borrowing less and public savings increases. 
C)  the government is borrowing more and public savings falls. 
D)  the government is borrowing more and public savings increases.

Question 19

You observe a closed economy that has a government deficit and positive investment. Which of the following is correct?

Accepted Answer

A)  Private and public saving are both positive. 
B)  Private saving is positive; public saving is negative. 
C)  Private saving is negative; public saving is positive. 
D)  Both private saving and public saving are negative. 
A)  Private and public saving are both positive. 
B)  Private saving is positive; public saving is negative. 
C)  Private saving is negative; public saving is positive. 
D)  Both private saving and public saving are negative.

Question 20

Compared to stocks, bonds offer the holder

Accepted Answer

A)  lower risk and lower potential return. 
B)  lower risk and higher potential return. 
C)  higher risk and lower potential return. 
D)  higher risk and higher potential return. 
A)  lower risk and lower potential return. 
B)  lower risk and higher potential return. 
C)  higher risk and lower potential return. 
D)  higher risk and higher potential return.

Exam 26: Saving, Investment, and the Financial System

Which of the following is not an important stock exchange in the United States?

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

It is claimed that a secondary advantage of mutual funds is that

Who accepts all of the risk associated with a mutual fund's portfolio of stocks and/or bonds?

In a closed economy private saving is $500 billion and the government budget deficit is $100 billion. What is investment?

Table 26-2 -Refer to Table 26-2. Which company had the highest dollar dividend per share?

If an economy is closed and if it has no government, then

A bond buyer is a

Longview Corporation has a stock price of $60, has issued 1,000,000 shares of stock, has retained earnings of $3 million dollars, and a dividend yield of 5 percent. The price-earnings ratio for Longview stock is

Which of the following statements is correct?

A higher interest rate makes more attractive. Therefore the quantity of loanable funds supplied increases.

Scenario 26-1. Assume the following information for an imaginary, closed economy. GDP = $100,000; taxes = $22,000; government purchases = $25,000; national saving = $15,000. -Refer to Scenario 26-1. For this economy, private saving amounts to

Suppose the government deficit increases, but the interest rate remains the same. Which of the following things might have happened simultaneously to keep interest rates the same?

Which of the following is not a nonsensical headline?

The bond market, the stock market, banks, pension funds, and insurance companies are all financial

Generally, if people begin to expect a company to have higher future profits, the price of the company's stock will begin to decrease.

When the government's budget deficit increases

You observe a closed economy that has a government deficit and positive investment. Which of the following is correct?

Compared to stocks, bonds offer the holder

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 Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

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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