Question 1

The prices of stock traded on exchanges are determined by

Accepted Answer

A)  the Corporate Stock Administration.
B)  the administrators of NASDAQ.
C)  the supply and demand for the stock.
D)  All of the above are correct.E) None of the above
F) A) and C)

Question 2

The country of Aquolina does not trade with any other country.Its GDP is $20 billion.Its government purchases $3 billion worth of goods and services each year,collects $3 billion in taxes,and provides $2 billion in transfer payments to households.Private saving in Aquolina is $4 billion.What is investment in Aquolina?

Accepted Answer

A)  $4 billion
B)  $3 billion
C)  $2 billion
D)  There is not enough information to answer the question.E) None of the above
F) All of the above

Question 3

Which of the following equations will always represent GDP in an open economy?

Accepted Answer

A)  S = I - G
B)  I = Y - C + G
C)  Y = C + I + G
D)  Y = C + I + G + NXE) C) and D)
F) B) and D)

Question 4

If Canada increases its budget deficit,it will reduce

Accepted Answer

A)  private saving and so shift the supply of loanable funds left.
B)  investment and so shift the demand for loanable funds left.
C)  public saving and so shift the supply of loanable funds left.
D)  None of the above is correct.E) A) and C)
F) A) and B)

Question 5

Which of the following is correct?

Accepted Answer

A)  Lenders sell bonds and borrowers buy them.
B)  Long-term bonds usually pay a lower interest rate than do short-term bonds because long-term bonds are riskier.
C)  Junk bonds refer to bonds that have been resold many times.
D)  None of the above is correct.E) A) and C)
F) All of the above

Question 6

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.E) C) and D)
F) A) and D)

Question 7

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.E) All of the above
F) B) and C)

Question 8

If the supply for loanable funds shifts right,the equilibrium interest rate

Accepted Answer

A)  and quantity of loanable funds rise.
B)  and quantity of loanable funds fall.
C)  rises and the quantity of loanable funds falls.
D)  falls and the quantity of loanable funds rises.E) A) and D)
F) C) and D)

Question 9

You are thinking of buying a bond from Knight Corporation.You know that this bond is long term and you know that Knight's business ventures are risky and uncertain.You then consider another bond with a shorter term to maturity issued by a company with good prospects and an established reputation.Which of the following is correct?

Accepted Answer

A)  The longer term would tend to make the interest rate on the bond issued by Knight higher, while the higher risk would tend to make the interest rate lower.
B)  The longer term would tend to make the interest rate on the bond issued by Knight lower, while the higher risk would tend to make the interest rate higher.
C)  Both the longer term and the higher risk would tend to make the interest rate lower on the bond issued by Knight.
D)  Both the longer term and the higher risk would tend to make the interest rate higher on the bond issued by Knight.E) A) and D)
F) None of the above

Question 10

Other things the same,the higher the rate of saving and investment in a country,the higher will be the standard of living.

Accepted Answer

A) True 
 B)False

Question 11

The country of Meditor uses the merit as its currency.Recent national income statistics showed that it had GDP of $700 million merits,no government transfer payments,taxes of $210 million merits,a budget surplus of $60 billion merits,and investment of $100 billion merits.What were its consumption and government expenditures on goods and services?

Accepted Answer

A)  450 million merits and $150 million merits
B)  410 million merits and $150 million merits
C)  330 million merits and $270 million merits
D)  290 million merits and $270 million meritsE) A) and B)
F) B) and C)

Question 12

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

Accepted Answer

A)  The demand for loanable funds shifted right.
B)  The demand for loanable funds shifted left.
C)  The supply of loanable funds shifted right.
D)  The supply of loanable funds shifted left.E) All of the above
F) None of the above

Question 13

Suppose that in a closed economy GDP is $11 trillion,consumption is $7 trillion,taxes are $2 trillion and the government runs a deficit of $1 trillion.What are private saving and national saving?

Accepted Answer

A)  $4 trillion and $1 trillion
B)  $4 trillion and -$1 trillion
C)  $2 trillion and $1 trillion
D)  $2 trillion and -$1 trillionE) A) and B)
F) A) and C)

Question 14

If Congress instituted an investment tax credit,the interest rate would

Accepted Answer

A)  rise and saving would rise.
B)  fall and saving would fall.
C)  rise and saving would fall.
D)  fall and saving would rise.E) A) and B)
F) A) and C)

Question 15

In a closed economy,what remains after paying for consumption and government purchases is

Accepted Answer

A)  national disposable income.
B)  national saving.
C)  public saving.
D)  private saving.E) A) and B)
F) B) and C)

Question 16

Suppose that the US offered a tax credit for firms who would build new factories in the US.Then,

Accepted Answer

A)  the demand for loanable funds would shift right, initially creating a surplus of loanable funds at the original interest rate.
B)  the demand for loanable funds would shift right, initially creating a shortage of loanable funds at the original interest rate.
C)  the supply of loanable funds would shift right, initially creating a surplus of loanable funds at the original interest rate.
D)  the supply of loanable funds would shift right, initially creating a shortage of loanable funds at the original interest rate.E) B) and C)
F) All of the above

Question 17

Stock indexes are

Accepted Answer

A)  the average of a group of stock prices.
B)  the average of a group of stock yields.
C)  reports in the newspaper that report on the price of the stock and earnings of the corporation.
D)  measures of the risk relative to the profitability of corporations.E) A) and B)
F) A) and C)

Question 18

If the government currently has a budget deficit,then

Accepted Answer

A)  it does not necessarily have a debt.
B)  its debt is increasing.
C)  government expenditures are greater than taxes.
D)  All of the above are correct.E) None of the above
F) All of the above

Question 19

Other things the same,if the government increases transfer payments to households,then the effect of this on the government's budget

Accepted Answer

A)  will make investment rise.
B)  will make the rate of interest rise.
C)  will make public saving rise.
D)  All of the above are correct.E) None of the above
F) All of the above

Question 20

In a closed economy,national saving equals

Accepted Answer

A)  investment.
B)  income minus the sum of consumption and government purchases.
C)  private saving plus public saving.
D)  All of the above are correct.E) A) and B)
F) A) and C)

Exam 26: Saving, investment, and the Financial System

Suppose that in a closed economy GDP is $11 trillion,consumption is $7 trillion,taxes are $2 trillion and the government runs a deficit of $1 trillion.What are private saving and national saving?

Correct Answer
verified

In a closed economy,national saving equals

Correct Answer
verified

If the supply for loanable funds shifts right,the equilibrium interest rate

Correct Answer
verified

Which of the following is correct?

Correct Answer
verified

Municipal bonds pay a relatively

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

Other things the same,if the government increases transfer payments to households,then the effect of this on the government's budget

Correct Answer
verified

If Congress instituted an investment tax credit,the interest rate would

Correct Answer
verified

Other things the same,the higher the rate of saving and investment in a country,the higher will be the standard of living.

Correct Answer
verified

In a closed economy,what remains after paying for consumption and government purchases is

Correct Answer
verified

Suppose that the US offered a tax credit for firms who would build new factories in the US.Then,

Correct Answer
verified

The prices of stock traded on exchanges are determined by

Correct Answer
verified

If Canada increases its budget deficit,it will reduce

Correct Answer
verified

Stock indexes are

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

If the government currently has a budget deficit,then

Correct Answer
verified

Which of the following equations will always represent GDP in an open economy?

Correct Answer
verified

Correct Answer
verified

Exam 26: Saving, investment, and the Financial System

Suppose that in a closed economy GDP is $11 trillion,consumption is $7 trillion,taxes are $2 trillion and the government runs a deficit of $1 trillion.What are private saving and national saving?

Correct AnswerverifiedShow Answer

In a closed economy,national saving equals

Correct AnswerverifiedShow Answer

If the supply for loanable funds shifts right,the equilibrium interest rate

Correct AnswerverifiedShow Answer

Which of the following is correct?

Correct AnswerverifiedShow Answer

Municipal bonds pay a relatively

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Other things the same,if the government increases transfer payments to households,then the effect of this on the government's budget

Correct AnswerverifiedShow Answer

If Congress instituted an investment tax credit,the interest rate would

Correct AnswerverifiedShow Answer

Other things the same,the higher the rate of saving and investment in a country,the higher will be the standard of living.

Correct AnswerverifiedShow Answer

In a closed economy,what remains after paying for consumption and government purchases is

Correct AnswerverifiedShow Answer

Suppose that the US offered a tax credit for firms who would build new factories in the US.Then,

Correct AnswerverifiedShow Answer

The prices of stock traded on exchanges are determined by

Correct AnswerverifiedShow Answer

If Canada increases its budget deficit,it will reduce

Correct AnswerverifiedShow Answer

Stock indexes are

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If the government currently has a budget deficit,then

Correct AnswerverifiedShow Answer

Which of the following equations will always represent GDP in an open economy?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified