Question 1

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) A) and B)
F) None of the above

Question 2

In macroeconomics, _____ refers to the purchase of new capital.

Accepted Answer

The answer of In macroeconomics, _____ refers to the purchase...

Question 3

If a share of stock in Dell sells for $70, the retained earnings per share are $5, and the dividend per share is $2, then the price-earnings ratio is 10.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following statements is correct?

Accepted Answer

A)  A large, well-known corporation such as Intel generally would use financial intermediation to finance expansion of its facilities.
B)  On average, managed funds outperform indexed funds.
C)  Unlike corporate bonds and stocks, checking accounts are a medium of exchange.
D)  A mutual fund is a financial market.E) A) and B)
F) None of the above

Question 5

Assume the bonds below have the same term and principal and that the state or local government that issues the municipal bond has a good credit rating. Which list has bonds correctly ordered from the one that pays the highest interest rate to the one that pays the lowest interest rate?

Accepted Answer

A)  corporate bond, municipal bond, U.S. government bond
B)  corporate bond, U.S. government bond, municipal bond
C)  municipal bond, U.S. government bond, corporate bond
D)  U.S. government bond, municipal bond, corporate bondE) All of the above
F) A) and D)

Question 6

What is a bond buyer promised when she buys a bond?

Accepted Answer

The answer of What is a bond buyer promised when...

Question 7

You are thinking of buying a bond from Bluestone Corporation. You know that this bond is long term and you know that Bluestone'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 Bluestone 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 Bluestone 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 Bluestone.
D)  Both the longer term and the higher risk would tend to make the interest rate higher on the bond issued by Bluestone.E) A) and B)
F) A) and C)

Question 8

A U.S. Treasury bond is a

Accepted Answer

A)  store of value and common medium of exchange.
B)  store of value, but not a common medium of exchange.
C)  a common medium of exchange, but not a store of value.
D)  neither a store of value nor a common medium of exchange.E) None of the above
F) C) and D)

Question 9

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.E) C) and D)
F) B) and D)

Question 10

We would expect the interest rate on Bond A to be higher than the interest rate on Bond B if the two bonds have identical characteristics except that

Accepted Answer

A)  Bond A was issued by a financially weak corporation and Bond B was issued by a financially strong corporation.
B)  Bond A was issued by the Exxon Mobil Corporation and Bond B was issued by the state of New York.
C)  Bond A has a term of 20 years and Bond B has a term of 1 year.
D)  All of the above are correct.E) A) and B)
F) All of the above

Question 11

The majority of economists believe that policies that reduce the saving rate will reduce long-run living standards.

Accepted Answer

A) True 
 B)False

Question 12

If the inflation rate is 2 percent and the real interest rate is 7 percent, then the nominal interest rate is

Accepted Answer

A)  3.5 percent.
B)  5 percent.
C)  9 percent
D)  7 percent.E) A) and B)
F) A) and C)

Question 13

Mutual funds

Accepted Answer

A)  provide diversification. Shareholders assume all of the risk associated with the mutual fund.
B)  provide diversification. Government insurance eliminates the risk of mutual fund shareholders.
C)  do not provide diversification. Shareholders assume all of the risk associated with the mutual fund
D)  do not provide diversification. Government insurance eliminates the risk of mutual fund shareholders.E) All of the above
F) None of the above

Question 14

The dividend yield is

Accepted Answer

A)  ​a financial intermediary.
B)  ​reported as a percentage of the stock's price.
C)  ​the same as retained earnings.
D)  ​a function of the company's earnings per share and the stock's price.E) C) and D)
F) None of the above

Question 15

Which of the following statements about mutual funds is correct?

Accepted Answer

A)  A mutual fund is a financial intermediary.
B)  A mutual fund acquires its funds primarily by selling shares to the public.
C)  People who buy shares from a mutual fund accept all of the risk and return associated with the mutual fund's portfolio.
D)  All of the above are correct.E) A) and B)
F) A) and C)

Question 16

Kathleen is considering expanding her dress shop. If interest rates rise she is

Accepted Answer

A)  less likely to expand. This illustrates why the supply of loanable funds slopes downward.
B)  more likely to expand. This illustrates why the supply of loanable funds slopes upward.
C)  less likely to expand. This illustrates why the demand for loanable funds slopes downward.
D)  more likely to expand. This illustrates why the demand for loanable funds slopes upward.E) B) and C)
F) A) and B)

Question 17

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. For this economy, national saving is equal to

Accepted Answer

A)  $1.1 trillion.
B)  $2.9 trillion.
C)  $1.2 trillion.
D)  $1.7 trillion.E) B) and C)
F) None of the above

Question 18

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 19

If Canada goes from a large budget deficit to a small budget deficit, it will

Accepted Answer

A)  increase private saving and so shift the supply of loanable funds right.
B)  increase investment and so shift the demand for loanable funds right.
C)  increase public saving and so shift the supply of loanable funds right.
D)  reduce national saving and shift the supply left.E) A) and B)
F) A) and D)

Question 20

Anything other than a change in the interest rate that decreases national saving shifts the supply of loanable funds to the left.

Accepted Answer

A) True 
 B)False

Exam 26: Saving, Investment, and the Financial System

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

Correct Answer
verified

The majority of economists believe that policies that reduce the saving rate will reduce long-run living standards.

Correct Answer
verified

Anything other than a change in the interest rate that decreases national saving shifts the supply of loanable funds to the left.

Correct Answer
verified

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.

Correct Answer
verified
demand, le...
View Answer

A U.S. Treasury bond is a

Correct Answer
verified

Correct Answer
verified

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. For this economy, national saving is equal to

Correct Answer
verified

Kathleen is considering expanding her dress shop. If interest rates rise she is

Correct Answer
verified

Mutual funds

Correct Answer
verified

Which of the following statements is correct?

Correct Answer
verified

In macroeconomics, _____ refers to the purchase of new capital.

Correct Answer
verified

If the government currently has a budget deficit, then

Correct Answer
verified

If Canada goes from a large budget deficit to a small budget deficit, it will

Correct Answer
verified

Which of the following statements about mutual funds is correct?

Correct Answer
verified

If a share of stock in Dell sells for $70, the retained earnings per share are $5, and the dividend per share is $2, then the price-earnings ratio is 10.

Correct Answer
verified

The dividend yield is

Correct Answer
verified

If the inflation rate is 2 percent and the real interest rate is 7 percent, then the nominal interest rate is

Correct Answer
verified

We would expect the interest rate on Bond A to be higher than the interest rate on Bond B if the two bonds have identical characteristics except that

Correct Answer
verified

Assume the bonds below have the same term and principal and that the state or local government that issues the municipal bond has a good credit rating. Which list has bonds correctly ordered from the one that pays the highest interest rate to the one that pays the lowest interest rate?

Correct Answer
verified

What is a bond buyer promised when she buys a bond?

Correct Answer
verified

Exam 26: Saving, Investment, and the Financial System

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

Correct AnswerverifiedShow Answer

The majority of economists believe that policies that reduce the saving rate will reduce long-run living standards.

Correct AnswerverifiedShow Answer

Anything other than a change in the interest rate that decreases national saving shifts the supply of loanable funds to the left.

Correct AnswerverifiedShow Answer

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.

Correct Answerverifieddemand, le...View AnswerShow Answer

A U.S. Treasury bond is a

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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. For this economy, national saving is equal to

Correct AnswerverifiedShow Answer

Kathleen is considering expanding her dress shop. If interest rates rise she is

Correct AnswerverifiedShow Answer

Mutual funds

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

In macroeconomics, _____ refers to the purchase of new capital.

Correct AnswerverifiedShow Answer

If the government currently has a budget deficit, then

Correct AnswerverifiedShow Answer

If Canada goes from a large budget deficit to a small budget deficit, it will

Correct AnswerverifiedShow Answer

Which of the following statements about mutual funds is correct?

Correct AnswerverifiedShow Answer

If a share of stock in Dell sells for $70, the retained earnings per share are $5, and the dividend per share is $2, then the price-earnings ratio is 10.

Correct AnswerverifiedShow Answer

The dividend yield is

Correct AnswerverifiedShow Answer

If the inflation rate is 2 percent and the real interest rate is 7 percent, then the nominal interest rate is

Correct AnswerverifiedShow Answer

We would expect the interest rate on Bond A to be higher than the interest rate on Bond B if the two bonds have identical characteristics except that

Correct AnswerverifiedShow Answer

Assume the bonds below have the same term and principal and that the state or local government that issues the municipal bond has a good credit rating. Which list has bonds correctly ordered from the one that pays the highest interest rate to the one that pays the lowest interest rate?

Correct AnswerverifiedShow Answer

What is a bond buyer promised when she buys a bond?

Correct AnswerverifiedShow Answer

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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.

Correct Answer
verified
demand, le...
View Answer

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