Question 1

A policy that induces people to save more shifts

Accepted Answer

A)  the supply of loanable funds and raises interest rates. 
B)  the supply of loanable funds and reduces interest rates. 
C)  the demand for loanable funds and raises interest rates. 
D)  the demand for loanable funds and reduces interest rates. 
A)  the supply of loanable funds and raises interest rates. 
B)  the supply of loanable funds and reduces interest rates. 
C)  the demand for loanable funds and raises interest rates. 
D)  the demand for loanable funds and reduces interest rates.

Question 2

World Wide Delivery Service Corporation develops a way to speed up its deliveries and reduce its costs. We would expect that this would

Accepted Answer

A)  raise the demand for existing shares of the stock, causing the price to rise. 
B)  decrease the demand for existing shares of the stock, causing the price to fall. 
C)  raise the supply of the existing shares of stock, causing the price to rise. 
D)  raise the supply of the existing shares of stock, causing the price to fall. 
A)  raise the demand for existing shares of the stock, causing the price to rise. 
B)  decrease the demand for existing shares of the stock, causing the price to fall. 
C)  raise the supply of the existing shares of stock, causing the price to rise. 
D)  raise the supply of the existing shares of stock, causing the price to fall.

Question 3

ABC Co. sells newly issued bonds. JLG Co. sells newly issued stocks. Which company is raising funds in financial markets?

Accepted Answer

A)  only ABC 
B)  only JLG 
C)  both ABC and JLG 
D)  neither ABC nor JLG 
A)  only ABC 
B)  only JLG 
C)  both ABC and JLG 
D)  neither ABC nor JLG

Question 4

Other things being constant, when a firm sells new shares of stock, the

Accepted Answer

A)  supply of the stock increases and the price decreases. 
B)  supply of the stock decreases and the price increases. 
C)  demand for the stock increases and the price increases. 
D)  demand for the stock decreases and the price decreases. 
A)  supply of the stock increases and the price decreases. 
B)  supply of the stock decreases and the price increases. 
C)  demand for the stock increases and the price increases. 
D)  demand for the stock decreases and the price decreases.

Question 5

If Congress instituted an investment tax credit, the demand for loanable funds would shift rightward.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following policy changes would lead to a decrease in the real interest rate and an increase in investment and saving?

Accepted Answer

A)  a larger investment tax credit 
B)  an expansion of eligibility for Individual Retirement Accounts 
C)  an increase in income-tax rates, with no change in the government budget deficit or surplus 
D)  an increase in government purchases, with no change in taxes 
A)  a larger investment tax credit 
B)  an expansion of eligibility for Individual Retirement Accounts 
C)  an increase in income-tax rates, with no change in the government budget deficit or surplus 
D)  an increase in government purchases, with no change in taxes

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. Which of the following movements would be consistent with the government budget going from deficit to surplus and the simultaneous enactment of an investment tax credit?

Accepted Answer

A)  a movement from Point A to Point C 
B)  a movement from Point B to Point A 
C)  a movement from Point B to Point F 
D)  a movement from Point C to Point B 
A)  a movement from Point A to Point C 
B)  a movement from Point B to Point A 
C)  a movement from Point B to Point F 
D)  a movement from Point C to Point B

Question 8

In the terminology of macroeconomics, what's the difference between a saver and an investor?

Accepted Answer

A saver earns more than he spe

Question 9

Crowding out occurs when investment declines because

Accepted Answer

A)  a budget deficit makes interest rates rise. 
B)  a budget deficit makes interest rates fall. 
C)  a budget surplus makes interest rates rise. 
D)  a budget surplus makes interest rates fall. 
A)  a budget deficit makes interest rates rise. 
B)  a budget deficit makes interest rates fall. 
C)  a budget surplus makes interest rates rise. 
D)  a budget surplus makes interest rates fall.

Question 10

In 2009, the U.S. government's budget deficit increased substantially. Other things the same, this means the

Accepted Answer

A)  supply of loanable funds shifted to the right. 
B)  supply of loanable funds shifted to the left. 
C)  demand for loanable funds shifted to the right. 
D)  demand for loanable funds shifted to the left. 
A)  supply of loanable funds shifted to the right. 
B)  supply of loanable funds shifted to the left. 
C)  demand for loanable funds shifted to the right. 
D)  demand for loanable funds shifted to the left.

Question 11

A stock's dividend yield is the

Accepted Answer

A)  dividend as a percentage of the price per share. 
B)  stock price as a percentage of the dividend. 
C)  dividend as a percentage of the retained earnings per share. 
D)  retained earnings per share as the percentage of the dividend. 
A)  dividend as a percentage of the price per share. 
B)  stock price as a percentage of the dividend. 
C)  dividend as a percentage of the retained earnings per share. 
D)  retained earnings per share as the percentage of the dividend.

Question 12

Table 26-1  
-Refer to Table 26-1. What was Hershey's earnings per share?

Accepted Answer

A)  $29.90 
B)  $2.79 
C)  $1.50 
D)  $0.36 
A)  $29.90 
B)  $2.79 
C)  $1.50 
D)  $0.36

Question 13

When the government runs a budget deficit,

Accepted Answer

A)  interest rates are lower than they would be if the budget were balanced. 
B)  national saving is higher than it would be if the budget were balanced. 
C)  investment is lower than it would be if the budget were balanced. 
D)  All of the above are correct. 
A)  interest rates are lower than they would be if the budget were balanced. 
B)  national saving is higher than it would be if the budget were balanced. 
C)  investment is lower than it would be if the budget were balanced. 
D)  All of the above are correct.

Question 14

Alberta buys a paint sprayer and a lift for her car customizing shop. A macroeconomist would refer to these purchases as investment.

Accepted Answer

A) True 
 B)False

Question 15

Retained earnings are

Accepted Answer

A)  earnings of a company that are not paid out to stockholders. 
B)  the amount of revenue a corporation receives for the sale of its products minus its costs of production as measured by its accountants. 
C)  the single most important piece of information about a stock. 
D)  computed by multiplying the dividend yield by the price of the stock. 
A)  earnings of a company that are not paid out to stockholders. 
B)  the amount of revenue a corporation receives for the sale of its products minus its costs of production as measured by its accountants. 
C)  the single most important piece of information about a stock. 
D)  computed by multiplying the dividend yield by the price of the stock.

Question 16

How do banks make profits?

Accepted Answer

They charge borrower

Question 17

Y = C + I + G + NX is an identity because

Accepted Answer

A)  each symbol identifies a macroeconomic variable. 
B)  the right-hand and left-hand sides are equal when an equilibrium is reached. 
C)  the equality holds due to the way the variables are defined. 
D)  None of the above is correct. 
A)  each symbol identifies a macroeconomic variable. 
B)  the right-hand and left-hand sides are equal when an equilibrium is reached. 
C)  the equality holds due to the way the variables are defined. 
D)  None of the above is correct.

Question 18

The country of Cedarland does not trade with any other country. Its GDP is $17 billion. Its government purchases $5 billion worth of goods and services each year and collects $6 billion in taxes. Private saving in Cedarland is $5 billion. For Cedarland,

Accepted Answer

A)  investment is $6 billion and consumption is $7 billion. 
B)  investment is $6 billion and consumption is $6 billion. 
C)  investment is $7 billion and consumption is $7 billion. 
D)  investment is $7 billion and consumption is $6 billion. 
A)  investment is $6 billion and consumption is $7 billion. 
B)  investment is $6 billion and consumption is $6 billion. 
C)  investment is $7 billion and consumption is $7 billion. 
D)  investment is $7 billion and consumption is $6 billion.

Question 19

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 20

If, for an imaginary closed economy, investment amounts to $10,000 and the government is running a $2,500 deficit, then private saving must amount to $12,500.

Accepted Answer

A) True 
 B)False

Exam 26: Saving, Investment, and the Financial System

A policy that induces people to save more shifts

World Wide Delivery Service Corporation develops a way to speed up its deliveries and reduce its costs. We would expect that this would

ABC Co. sells newly issued bonds. JLG Co. sells newly issued stocks. Which company is raising funds in financial markets?

Other things being constant, when a firm sells new shares of stock, the

If Congress instituted an investment tax credit, the demand for loanable funds would shift rightward.

Which of the following policy changes would lead to a decrease in the real interest rate and an increase in investment and saving?

In the terminology of macroeconomics, what's the difference between a saver and an investor?

Crowding out occurs when investment declines because

In 2009, the U.S. government's budget deficit increased substantially. Other things the same, this means the

A stock's dividend yield is the

Table 26-1 -Refer to Table 26-1. What was Hershey's earnings per share?

When the government runs a budget deficit,

Alberta buys a paint sprayer and a lift for her car customizing shop. A macroeconomist would refer to these purchases as investment.

Retained earnings are

How do banks make profits?

Y = C + I + G + NX is an identity because

The country of Cedarland does not trade with any other country. Its GDP is $17 billion. Its government purchases $5 billion worth of goods and services each year and collects $6 billion in taxes. Private saving in Cedarland is $5 billion. For Cedarland,

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.

If, for an imaginary closed economy, investment amounts to $10,000 and the government is running a $2,500 deficit, then private saving must amount to $12,500.

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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