Question 1

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

Accepted Answer

bond, stoc

Question 2

Which of the following numbers is not associated with shares of a company's stock?

Accepted Answer

A)  term 
B)  dividend 
C)  price 
D)  price-earnings ratio 
A)  term 
B)  dividend 
C)  price 
D)  price-earnings ratio

Question 3

In a closed economy, what does (Y - T - C) represent?

Accepted Answer

A)  national saving 
B)  government tax revenue 
C)  public saving 
D)  private saving 
A)  national saving 
B)  government tax revenue 
C)  public saving 
D)  private saving

Question 4

If consumers reduced their spending, what would happen to the interest rate and investment?

Accepted Answer

The interest rate wo

Question 5

When tax code changes reduce saving incentives, the interest rate will _____ and investment will _____.

Accepted Answer

The answer of When tax code changes reduce saving incentives,...

Question 6

Suppose a closed economy had public saving of -$1 trillion and private saving of $3 trillion. What are national saving and investment for this country?

Accepted Answer

A)  $2 trillion, $2 trillion 
B)  $2 trillion, $3 trillion 
C)  $3 trillion, $3 trillion 
D)  $4 trillion, $2 trillion 
A)  $2 trillion, $2 trillion 
B)  $2 trillion, $3 trillion 
C)  $3 trillion, $3 trillion 
D)  $4 trillion, $2 trillion

Question 7

Robert buys bonds. Rachel buys a new truck for her landscaping business. Identify both as savers, investors, both, or neither.

Accepted Answer

Robert is

Question 8

A restaurant chain announces declining revenues. What's the name of the type of risk that this news raises for holders of this chain's bonds? What does this news to do the interest rate on this chain's bonds?

Accepted Answer

default ri

Question 9

Which of the following events could explain an increase in interest rates together with a decrease in investment?

Accepted Answer

A)  The government budget went from surplus to deficit. 
B)  The government instituted an investment tax credit. 
C)  The government reduced the tax rate on savings. 
D)  None of the above is correct. 
A)  The government budget went from surplus to deficit. 
B)  The government instituted an investment tax credit. 
C)  The government reduced the tax rate on savings. 
D)  None of the above is correct.

Question 10

If a firm sells a total of 100 shares of stock, then

Accepted Answer

A)  each share represents 1 percent of the firm's indebtedness. 
B)  each share represents ownership of 1 percent of the firm. 
C)  the firm is engaging in term finance. 
D)  All of the above are correct. 
A)  each share represents 1 percent of the firm's indebtedness. 
B)  each share represents ownership of 1 percent of the firm. 
C)  the firm is engaging in term finance. 
D)  All of the above are correct.

Question 11

Public saving is T - G, while private saving is Y - T - C.

Accepted Answer

A) True 
 B)False

Question 12

On which of these bonds is the prospect of default least likely?

Accepted Answer

A)  a junk bond 
B)  a bond issued by the state of Arizona 
C)  a bond issued by the federal government 
D)  a bond issued by General Electric Corporation 
A)  a junk bond 
B)  a bond issued by the state of Arizona 
C)  a bond issued by the federal government 
D)  a bond issued by General Electric Corporation

Question 13

Which of the following would a macroeconomist consider as investment?

Accepted Answer

A)  Marisa purchases a bond issued by Proctor and Gamble Corp. 
B)  Karlee purchases stock issued by Texas Instruments, Inc. 
C)  Charlie builds a new coffee shop. 
D)  All of the above are correct. 
A)  Marisa purchases a bond issued by Proctor and Gamble Corp. 
B)  Karlee purchases stock issued by Texas Instruments, Inc. 
C)  Charlie builds a new coffee shop. 
D)  All of the above are correct.

Question 14

When tax code changes reduce investment incentives, the _____ for loanable funds curve shifts to the _____. This results in a(n) _____ in the interest rate and a(n) _____ in investment.

Accepted Answer

demand, le

Question 15

Suppose Congress institutes an investment tax credit. What would happen in the market for loanable funds?

Accepted Answer

A)  The interest rate and investment would fall. 
B)  The interest rate and investment would rise. 
C)  The interest rate would rise and investment would fall. 
D)  None of the above is necessarily correct. 
A)  The interest rate and investment would fall. 
B)  The interest rate and investment would rise. 
C)  The interest rate would rise and investment would fall. 
D)  None of the above is necessarily correct.

Question 16

Public saving is the difference between and .

Accepted Answer

tax revenue, governm

Question 17

If there is a shortage of loanable funds, then

Accepted Answer

A)  the quantity demanded is greater than the quantity supplied and the interest rate will rise. 
B)  the quantity demanded is greater than the quantity supplied and the interest rate will fall. 
C)  the quantity supplied is greater than the quantity demanded and the interest rate will rise. 
D)  the quantity supplied is greater than the quantity demanded and the interest rate will fall. 
A)  the quantity demanded is greater than the quantity supplied and the interest rate will rise. 
B)  the quantity demanded is greater than the quantity supplied and the interest rate will fall. 
C)  the quantity supplied is greater than the quantity demanded and the interest rate will rise. 
D)  the quantity supplied is greater than the quantity demanded and the interest rate will fall.

Question 18

For a closed economy, GDP is $11 trillion, consumption is $7 trillion, taxes are $2.5 trillion and the government runs a surplus of $1 trillion. What are private saving and national saving?

Accepted Answer

A)  $1.5 trillion and $2.5 trillion, respectively 
B)  $2.5 trillion and $1.5 trillion, respectively 
C)  $2.5 trillion and $2.5 trillion, respectively 
D)  $1.5 trillion and $1.5 trillion, respectively 
A)  $1.5 trillion and $2.5 trillion, respectively 
B)  $2.5 trillion and $1.5 trillion, respectively 
C)  $2.5 trillion and $2.5 trillion, respectively 
D)  $1.5 trillion and $1.5 trillion, respectively

Question 19

Financial intermediaries are

Accepted Answer

A)  the same as financial markets. 
B)  individuals who make profits by buying a stock low and selling it high. 
C)  a more general name for financial assets such as stocks, bonds, and checking accounts. 
D)  financial institutions through which savers can indirectly provide funds to borrowers. 
A)  the same as financial markets. 
B)  individuals who make profits by buying a stock low and selling it high. 
C)  a more general name for financial assets such as stocks, bonds, and checking accounts. 
D)  financial institutions through which savers can indirectly provide funds to borrowers.

Question 20

Municipal bonds pay a relatively

Accepted Answer

A)  low rate of interest because of their high default risk and because the interest they pay is subject to federal income tax. 
B)  low rate of interest because of their low default risk and because the interest they pay is not subject to federal income tax. 
C)  high rate of interest because of their high default risk and because federal taxes must be paid on the interest they pay. 
D)  high rate of interest because of their low default risk and because the interest they pay is not subject to federal income tax. 
A)  low rate of interest because of their high default risk and because the interest they pay is subject to federal income tax. 
B)  low rate of interest because of their low default risk and because the interest they pay is not subject to federal income tax. 
C)  high rate of interest because of their high default risk and because federal taxes must be paid on the interest they pay. 
D)  high rate of interest because of their low default risk and because the interest they pay is not subject to federal income tax.

Exam 26: Saving, Investment, and the Financial System

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

Which of the following numbers is not associated with shares of a company's stock?

In a closed economy, what does (Y - T - C) represent?

If consumers reduced their spending, what would happen to the interest rate and investment?

When tax code changes reduce saving incentives, the interest rate will _____ and investment will _____.

Suppose a closed economy had public saving of -$1 trillion and private saving of $3 trillion. What are national saving and investment for this country?

Robert buys bonds. Rachel buys a new truck for her landscaping business. Identify both as savers, investors, both, or neither.

A restaurant chain announces declining revenues. What's the name of the type of risk that this news raises for holders of this chain's bonds? What does this news to do the interest rate on this chain's bonds?

Which of the following events could explain an increase in interest rates together with a decrease in investment?

If a firm sells a total of 100 shares of stock, then

Public saving is T - G, while private saving is Y - T - C.

On which of these bonds is the prospect of default least likely?

Which of the following would a macroeconomist consider as investment?

When tax code changes reduce investment incentives, the _____ for loanable funds curve shifts to the _____. This results in a(n) _____ in the interest rate and a(n) _____ in investment.

Suppose Congress institutes an investment tax credit. What would happen in the market for loanable funds?

Public saving is the difference between and .

If there is a shortage of loanable funds, then

For a closed economy, GDP is $11 trillion, consumption is $7 trillion, taxes are $2.5 trillion and the government runs a surplus of $1 trillion. What are private saving and national saving?

Financial intermediaries are

Municipal bonds pay a relatively

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

Filters

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

When tax code changes reduce saving incentives, the interest rate will _ and investment will _.

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