Exam 26: Saving, Investment, and the Financial System

Suppose that in a closed economy GDP is equal to 15,000, government purchases are equal to 3,000, consumption equals 10,500, and taxes equal 3,500. What are private saving and public saving?

When someone borrows to purchase capital goods, he is using someone else's to fund his .

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

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

Which of the following could explain a decrease in the equilibrium interest rate and in the equilibrium quantity of loanable funds?

Last quarter in a closed economy GDP was 200,000. Expenditures on capital goods such as business equipment and structures was 19,000, inventory rose 1,000, and new construction of homes was 8,000. Consumption was 135,000 and taxes were 32,000. What was public saving?

Figure 26-3. The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves. -Refer to Figure 26-3. What, specifically, does the label on the vertical axis, i, represent?

Net exports must equal zero for any economy

The first three elements of a financial crisis are correctly represented as taking place in the following order:

For an economy that engages in international trade, GDP is divided into four components. Which of the following items is not one of those components?

A larger budget deficit

A national chain of grocery stores wants to finance the construction of several new stores. The firm has limited internal funds, so it likely will

Crowding out occurs when

Scenario 26-3. Assume the following information for an imaginary, open economy. Consumption = $1,000; investment = $200; net exports = -$50; taxes = $230; private saving = $225; and national saving = $150. -Refer to Scenario 26-3. For this economy, GDP equals

You have some estimates of national accounts numbers for a closed economy for the coming year. Under one set of expectations, government purchases will be $30 billion, transfer payments will be $10 billion, and taxes will be $45 billion. Under another set of expectations, GDP will be $200 billion, taxes will be $50 billion, transfer payments will be $20 billion, consumption will be $120 million, and investment will be $40 billion. Based on these numbers in the first case there should be a

A high price-earnings ratio for a stock indicates that either the stock is

It is claimed that mutual funds have two advantages. The first is that mutual funds allow people with small amounts of money to diversify. The second is that mutual funds provide the skills of professional money managers who buy stocks they believe will be the most profitable and thereby increase the return that mutual fund depositors earn on their savings.

Other things the same, as the maturity of a bond becomes longer, the bond will pay

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. Suppose, for this economy, the relationship between the real interest rate, r, and investment, I, is given by the equation I = 10.78 - 3.03r. (If, for example, r = 10, this means that the real interest rate is 10 percent.) The equilibrium real interest rate for this economy is

The country of Bienmundo does not trade with any other country. Its GDP is $30 billion. Its government purchases $5 billion worth of goods and services each year and collects $6 billion in taxes. Private saving in Bienmundo amounts to $5 billion. What are consumption and investment in Bienmundo?