Question 1

Country B has private savings of $60 billion and investment expenditures of $50 billion.How much is Country B's deficit?

Accepted Answer

A)  -$20 billion
B)  -$10 billion
C)  $10 billion
D)  $20 billionE) A) and D)
F) None of the above

Question 2

Which of the following people purchased the correct asset to meet their objective?

Accepted Answer

A)  Michelle wanted to be a part owner of Mamma Rosa's Pizza, so she purchased a bond issued by Mamma Rosa's Pizza.
B)  Tim wanted a high return, even if it meant taking some risk, so he purchased stock issued by Specific Electric instead of bonds issued by Specific Electric.
C)  Jennifer wanted to buy equity in Honda, so she purchased bonds sold by Honda.
D)  George wanted to lend money at a specified rate of interest to Research In Motion (RIM) , so he purchased RIM stock.E) A) and D)
F) A) and C)

Question 3

In a closed economy,what does national saving equal?

Accepted Answer

A)  income minus consumption
B)  income minus the sum of consumption and government expenditures
C)  income minus consumption minus taxes
D)  income minus government expendituresE) A) and D)
F) A) and C)

Question 4

PacknCamp Corporation has a price of $50,has issued 2 million shares,has increased its cumulated retained earnings by $2 million,and has a dividend yield of 2 percent.What is the price/earnings ratio of PacknCamp?

Accepted Answer

A)  50, which is high compared to historical standards of the market
B)  50, which is low compared to historical standards of the market
C)  25, which is low compared to historical standards of the market
D)  25, which is high compared to historical standards of the marketE) All of the above
F) C) and D)

Question 5

Suppose that investment rises and interest rates fall.Which of the following best explains these changes?

Accepted Answer

A)  The government went from surplus to deficit.
B)  The government instituted an investment tax credit.
C)  The government reduced the tax rate on savings.
D)  The government repealed an investment tax credit.E) A) and B)
F) C) and D)

Question 6

Corporate bonds generally have higher interest rates than federal government bonds.

Accepted Answer

A) True 
 B)False

Question 7

When the federal government is in debt,it follows that it has a deficit.

Accepted Answer

A) True 
 B)False

Question 8

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 9

What has the typical price/earnings ratio been historically?

Accepted Answer

A)  about 3
B)  about 8
C)  about 15
D)  about 20E) B) and D)
F) B) and C)

Question 10

Which of the following terms refers to the length of time until a bond matures?

Accepted Answer

A)  duration
B)  term
C)  maturity
D)  intermediationE) A) and B)
F) B) and C)

Question 11

Assuming that other things remain the same,if the government increases transfer payments to households,which of the following will most likely happen?

Accepted Answer

A)  Investment will rise.
B)  The rate of interest will rise.
C)  Public saving will rise.
D)  The market for loanable funds will be unaffected.E) A) and D)
F) All of the above

Question 12

Corporations receive no proceeds from the resale of their stock.

Accepted Answer

A) True 
 B)False

Question 13

Consider a closed economy.Use the supply and demand for loanable funds model to predict the effects of the following events on interest rates and investment.
a. The government introduces a tax credit for savings accounts of up to $5000 per year.
b. The government introduces a tax credit for savings accounts of up to $5000 per year, and at the same time it repeals an investment tax exemption provision.
c. The government raises the tax rates.
d. The government issues bonds worth $10 billion.

Accepted Answer

a.Since saving is now less taxed,one wou...

Question 14

Which of the following would most likely happen in the market for loanable funds if the government were to decrease the tax rate on interest income?

Accepted Answer

A)  The supply of and demand for loanable funds would shift to the right.
B)  The supply of and demand for loanable funds would shift to the left.
C)  The supply of loanable funds would shift to the right, and the demand for loanable funds would shift to the left.
D)  The supply of loanable funds would shift to the right, and the demand for loanable funds will remain unchanged.E) A) and B)
F) A) and C)

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

The country of Meritor uses the merit as its currency.Recent national income statistics shows that it has GDP of 700 million merits,no government transfer payments,taxes of 210 million merits,a budget surplus of 60 million merits,and investment of 100 million merits.What is the sum of its consumption and government expenditures?

Accepted Answer

A)  600 million merits
B)  560 million merits
C)  490 million merits
D)  470 million meritsE) A) and D)
F) A) and B)

Question 17

The sale of stocks or bonds to raise money is known as equity finance.

Accepted Answer

A) True 
 B)False

Question 18

In 1995,MP Bill Gatt proposed that the income tax be replaced with a consumption tax.If his program had been passed,how would the equilibrium interest rate and the quantity of loanable funds have been affected?

Accepted Answer

A)  The equilibrium interest rate and quantity of loanable funds would be lower.
B)  The equilibrium interest rate and quantity of loanable funds would be higher.
C)  The equilibrium interest rate would be higher, and the equilibrium quantity of loanable funds would be lower.
D)  The equilibrium interest rate would be lower, and the equilibrium quantity of loanable funds would be higher.E) None of the above
F) A) and B)

Question 19

What does a high price/earnings ratio indicate?

Accepted Answer

A)  Either the stock is undervalued or people have become more optimistic about the corporation's prospects.
B)  Either the stock is overvalued or people have become more optimistic about the corporation's prospects.
C)  Either the stock is overvalued or people have become less optimistic about the corporation's prospects.
D)  Either the stock is undervalued or people have become less optimistic about the corporation's prospects.E) C) and D)
F) None of the above

Question 20

Which of the following is the primary advantage of mutual funds?

Accepted Answer

A)  They usually make a return that "beats the market."
B)  They allow people with small amounts of money to diversify.
C)  They provide customers with a medium of exchange.
D)  They allow investing in venture companies.E) B) and C)
F) A) and D)

Exam 8: Saving,Investment,and the Financial System

Correct Answer
verified

Country B has private savings of $60 billion and investment expenditures of $50 billion.How much is Country B's deficit?

Correct Answer
verified

Which of the following terms refers to the length of time until a bond matures?

Correct Answer
verified

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

Correct Answer
verified

Which of the following would most likely happen in the market for loanable funds if the government were to decrease the tax rate on interest income?

Correct Answer
verified

When the federal government is in debt,it follows that it has a deficit.

Correct Answer
verified

PacknCamp Corporation has a price of $50,has issued 2 million shares,has increased its cumulated retained earnings by $2 million,and has a dividend yield of 2 percent.What is the price/earnings ratio of PacknCamp?

Correct Answer
verified

Assuming that other things remain the same,if the government increases transfer payments to households,which of the following will most likely happen?

Correct Answer
verified

Which of the following is the primary advantage of mutual funds?

Correct Answer
verified

Suppose that investment rises and interest rates fall.Which of the following best explains these changes?

Correct Answer
verified

What does a high price/earnings ratio indicate?

Correct Answer
verified

In a closed economy,what does national saving equal?

Correct Answer
verified

In 1995,MP Bill Gatt proposed that the income tax be replaced with a consumption tax.If his program had been passed,how would the equilibrium interest rate and the quantity of loanable funds have been affected?

Correct Answer
verified

Which of the following people purchased the correct asset to meet their objective?

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified
a.Since saving is now less taxed,one wou...
View Answer

The sale of stocks or bonds to raise money is known as equity finance.

Correct Answer
verified

Corporate bonds generally have higher interest rates than federal government bonds.

Correct Answer
verified

What has the typical price/earnings ratio been historically?

Correct Answer
verified

Corporations receive no proceeds from the resale of their stock.

Correct Answer
verified

Exam 8: Saving,Investment,and the Financial System

Correct AnswerverifiedShow Answer

Country B has private savings of $60 billion and investment expenditures of $50 billion.How much is Country B's deficit?

Correct AnswerverifiedShow Answer

Which of the following terms refers to the length of time until a bond matures?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following would most likely happen in the market for loanable funds if the government were to decrease the tax rate on interest income?

Correct AnswerverifiedShow Answer

When the federal government is in debt,it follows that it has a deficit.

Correct AnswerverifiedShow Answer

PacknCamp Corporation has a price of $50,has issued 2 million shares,has increased its cumulated retained earnings by $2 million,and has a dividend yield of 2 percent.What is the price/earnings ratio of PacknCamp?

Correct AnswerverifiedShow Answer

Assuming that other things remain the same,if the government increases transfer payments to households,which of the following will most likely happen?

Correct AnswerverifiedShow Answer

Which of the following is the primary advantage of mutual funds?

Correct AnswerverifiedShow Answer

Suppose that investment rises and interest rates fall.Which of the following best explains these changes?

Correct AnswerverifiedShow Answer

What does a high price/earnings ratio indicate?

Correct AnswerverifiedShow Answer

In a closed economy,what does national saving equal?

Correct AnswerverifiedShow Answer

In 1995,MP Bill Gatt proposed that the income tax be replaced with a consumption tax.If his program had been passed,how would the equilibrium interest rate and the quantity of loanable funds have been affected?

Correct AnswerverifiedShow Answer

Which of the following people purchased the correct asset to meet their objective?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct Answerverifieda.Since saving is now less taxed,one wou...View AnswerShow Answer

The sale of stocks or bonds to raise money is known as equity finance.

Correct AnswerverifiedShow Answer

Corporate bonds generally have higher interest rates than federal government bonds.

Correct AnswerverifiedShow Answer

What has the typical price/earnings ratio been historically?

Correct AnswerverifiedShow Answer

Corporations receive no proceeds from the resale of their stock.

Correct AnswerverifiedShow Answer

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a.Since saving is now less taxed,one wou...
View Answer

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Correct Answer
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Correct Answer
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