Question 1

If the quantity of loanable funds supplied exceeds the quantity of loanable funds demanded,

Accepted Answer

A)  there is a surplus and the interest rate is above the equilibrium level.
B)  there is a surplus and the interest rate is below the equilibrium level.
C)  there is a shortage and the interest rate is above the equilibrium level.
D)  there is a shortage and the interest rate is below the equilibrium level.E) B) and D)
F) A) and B)

Question 2

Most entrepreneurs finance their purchases of real capital using their past saving.

Accepted Answer

A) True 
 B)False

Question 3

Compared to long-term bonds,other things the same,short-term bonds generally have

Accepted Answer

A)  more risk and so pay higher interest.
B)  less risk and so pay lower interest.
C)  less risk and so pay higher interest.
D)  about the same risk and so pay about the same interest.E) C) and D)
F) B) and D)

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

Crowding out occurs when investment declines because

Accepted Answer

A)  a budget deficit makes interest rates rise.
B)  a budget deficit makes interest rates fall.
C)  a budget surplus makes interest rates rise.
D)  a budget surplus makes interest rates fall.E) A) and B)
F) A) and C)

Question 6

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 7

Historically,the typical price-earnings ratio is about

Accepted Answer

A)  3
B)  8
C)  15
D)  26E) A) and B)
F) B) and C)

Question 8

Which of the following statements is correct?

Accepted Answer

A)  A general, persistent decline in stock prices may signal that the economy is about to enter a boom period because people will be able to buy stock for less money.
B)  A general, persistent decline in stock prices may signal that the economy is about to enter a recession because low stock prices may mean that people are expecting low corporate profits.
C)  A general, persistent decline in stock prices may signal that the economy is about to enter a recession because low stock prices mean that corporations have had low profits in the past.
D)  Expectations about the business cycle have no impact on stock prices.E) B) and C)
F) None of the above

Question 9

Suppose the Move It! exercise chain has revenues of $45 million,accounting costs of $15 million,and currently has issued 10 million shares of stocks selling at $90 each.Compute the price to earning ratio.Show your work.Is this ratio relatively high or low? What might an increase in the price to earning ratio indicate?

Accepted Answer

The earnings per share is ($45 million -...

Question 10

The country of Nemedia does not trade with any other country.Its GDP is $30 billion.Its government purchases $5 billion worth of goods and services each year,collects $7 billion in taxes,and provides $3 billion in transfer payments to households.Private saving in Nemedia is $5 billion.What is consumption and investment in Nemedia?

Accepted Answer

A)  $18 billion and $5 billion
B)  $21 billion and $4 billion
C)  $13 billion and $7 billion
D)  There is not enough information to answer the question.E) A) and D)
F) B) and C)

Question 11

Other things the same,when the interest rate rises

Accepted Answer

A)  people would want to lend more, making the supply of loanable funds increase.
B)  people would want to lend less, making the supply of loanable funds decrease.
C)  people would want to lend more, making the quantity of loanable funds supplied increase.
D)  people would want to lend less, making the quantity of loanable funds supplied decrease.E) B) and C)
F) C) and D)

Question 12

In the national income accounting identity showing the equality between national saving and investment,what is the representation of private saving and what is the representation of public saving?

Accepted Answer

Private saving is Y ...

Question 13

Mount Adams Jazz Corporation has a price of $100,a dividend of $0.80,and retained earnings of $2.00 per share.The dividend yield on this stock is

Accepted Answer

A)  2.8 percent.
B)  2 percent.
C)  1.2 percent.
D)  .8 percent.E) B) and C)
F) A) and C)

Question 14

Suppose the market for loanable funds is in equilibrium.Given the numbers below,determine the quantity of funds demanded.

Accepted Answer

A)  $25 billion
B)  $20 billion
C)  $15 billion
D)  $10 billionE) B) and C)
F) None of the above

Question 15

Buskin's Corporation has issued 2 million shares of stocks.Its earnings were $10 million dollars of which it retained $6 million.What was the dividend per share?

Accepted Answer

A)  $2.
B)  $3.
C)  $5
D)  None of the above is correct.E) A) and D)
F) A) and C)

Question 16

The slope of the supply of loanable funds curve represents the

Accepted Answer

A)  positive relation between the real interest rate and investment.
B)  positive relation between the real interest rate and saving.
C)  negative relation between the real interest rate and investment.
D)  negative relation between the real interest rate and saving.E) None of the above
F) B) and C)

Question 17

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

Accepted Answer

A)  undervalued or people are relatively optimistic about the corporation's prospects.
B)  overvalued or people are relatively optimistic about the corporation's prospects.
C)  overvalued or people are relatively pessimistic about the corporation's prospects.
D)  undervalued or people are relatively pessimistic about the corporation's prospects.E) C) and D)
F) All of the above

Question 18

Which of the following is correct?

Accepted Answer

A)  Some bonds have terms as short as a few months.
B)  Because they are so risky, junk bonds pay a low rate of interest.
C)  Corporations buy bonds to raise funds.
D)  All of the above are correct.E) A) and D)
F) None of the above

Question 19

Other things the same,a higher interest rate induces people to

Accepted Answer

A)  save more, so the supply of loanable funds slopes upward.
B)  save less, so the supply of loanable funds slopes downward.
C)  invest more, so the supply of loanable funds slopes upward.
D)  invest less, so the supply of loanable funds slopes downward.E) B) and D)
F) None of the above

Question 20

When a corporation experiences financial problems,bondholders are paid before stockholders.

Accepted Answer

A) True 
 B)False

Exam 26: Saving, investment, and the Financial System

Correct Answer
verified

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

Correct Answer
verified

When a corporation experiences financial problems,bondholders are paid before stockholders.

Correct Answer
verified

If the quantity of loanable funds supplied exceeds the quantity of loanable funds demanded,

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

Compared to long-term bonds,other things the same,short-term bonds generally have

Correct Answer
verified

Most entrepreneurs finance their purchases of real capital using their past saving.

Correct Answer
verified

Mount Adams Jazz Corporation has a price of $100,a dividend of $0.80,and retained earnings of $2.00 per share.The dividend yield on this stock is

Correct Answer
verified

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

Correct Answer
verified

Other things the same,when the interest rate rises

Correct Answer
verified

Historically,the typical price-earnings ratio is about

Correct Answer
verified

Which of the following statements is correct?

Correct Answer
verified

Crowding out occurs when investment declines because

Correct Answer
verified

Suppose the market for loanable funds is in equilibrium.Given the numbers below,determine the quantity of funds demanded.

Correct Answer
verified

Which of the following is correct?

Correct Answer
verified

The slope of the supply of loanable funds curve represents the

Correct Answer
verified

Buskin's Corporation has issued 2 million shares of stocks.Its earnings were $10 million dollars of which it retained $6 million.What was the dividend per share?

Correct Answer
verified

Correct Answer
verified
The earnings per share is ($45 million -...
View Answer

In the national income accounting identity showing the equality between national saving and investment,what is the representation of private saving and what is the representation of public saving?

Correct Answer
verified
Private saving is Y ...
View Answer

Other things the same,a higher interest rate induces people to

Correct Answer
verified

Exam 26: Saving, investment, and the Financial System

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

When a corporation experiences financial problems,bondholders are paid before stockholders.

Correct AnswerverifiedShow Answer

If the quantity of loanable funds supplied exceeds the quantity of loanable funds demanded,

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

Compared to long-term bonds,other things the same,short-term bonds generally have

Correct AnswerverifiedShow Answer

Most entrepreneurs finance their purchases of real capital using their past saving.

Correct AnswerverifiedShow Answer

Mount Adams Jazz Corporation has a price of $100,a dividend of $0.80,and retained earnings of $2.00 per share.The dividend yield on this stock is

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Other things the same,when the interest rate rises

Correct AnswerverifiedShow Answer

Historically,the typical price-earnings ratio is about

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Crowding out occurs when investment declines because

Correct AnswerverifiedShow Answer

Suppose the market for loanable funds is in equilibrium.Given the numbers below,determine the quantity of funds demanded.

Correct AnswerverifiedShow Answer

Which of the following is correct?

Correct AnswerverifiedShow Answer

The slope of the supply of loanable funds curve represents the

Correct AnswerverifiedShow Answer

Buskin's Corporation has issued 2 million shares of stocks.Its earnings were $10 million dollars of which it retained $6 million.What was the dividend per share?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedThe earnings per share is ($45 million -...View AnswerShow Answer

In the national income accounting identity showing the equality between national saving and investment,what is the representation of private saving and what is the representation of public saving?

Correct AnswerverifiedPrivate saving is Y ...View AnswerShow Answer

Other things the same,a higher interest rate induces people to

Correct AnswerverifiedShow Answer

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The earnings per share is ($45 million -...
View Answer

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Private saving is Y ...
View Answer

Correct Answer
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