Question 1

Which of the following equations represents GDP for an open economy?

Accepted Answer

A)   Y = C + I + G + NX
B)   NX = I - G
C)   I = Y - C + G + NX
D)   Y = C + I + GE) All of the above
F) C) and D)

Question 2

Using a graph representing the market for loanable funds, show and explain what happens to interest rates and investment if the government budget goes from a deficit to a surplus.

Accepted Answer

As shown in the graph below, the economy...

Question 3

For a closed economy, GDP is $12 trillion, consumption is $7 trillion, taxes net of transfers are $3 trillion and the government runs a deficit of $1 trillion. What are private saving and national saving?

Accepted Answer

A)   $5 trillion and $3 trillion, respectively
B)   $5 trillion and $1 trillion, respectively
C)   $2 trillion and $3 trillion, respectively
D)   $2 trillion and $1 trillion, respectivelyE) All of the above
F) B) and C)

Question 4

When economists refer to investment, they mean the purchasing of stocks and bonds and other types of saving.

Accepted Answer

A) True 
 B)False

Question 5

If, for an imaginary closed economy, investment amounts to $12,000 and the government is running a $2,000 deficit, then private saving must amount to $10,000.

Accepted Answer

A) True 
 B)False

Question 6

Suppose government expenditures on goods and services increase, transfers are unchanged, and taxes rise by less than the increase in expenditures. These changes in the government's budget cause

Accepted Answer

A)   both the equilibrium interest rate and the equilibrium quantity of loanable funds to fall.
B)   both the equilibrium interest rate and the equilibrium quantity of loanable funds to rise.
C)   the equilibrium interest rate to rise and the equilibrium quantity of loanable funds to fall.
D)   the equilibrium interest rate to fall and the equilibrium quantity of loanable funds to rise.E) B) and D)
F) None of the above

Question 7

For an imaginary closed economy, T = $5,000; S = $11,000; C = $48,000; and the government is running a budget surplus of $1,000. Then

Accepted Answer

A)   private saving = $10,000 and GDP = $55,000.
B)   private saving = $10,000 and GDP = $63,000.
C)   private saving = $12,000 and GDP = $67,000.
D)   private saving = $12,000 and GDP = $69,000.E) B) and C)
F) A) and D)

Question 8

Figure 26-1. The figure depicts a demand-for-loanable-funds curve and two supply-of-loanable-funds curves. 
-Refer to Figure 26-1. Which of the following events would shift the supply curve from S1 to S2?

Accepted Answer

A)   In response to tax reform, firms are encouraged to invest more than they previously invested.
B)   In response to tax reform, households are encouraged to save more than they previously saved.
C)   Government goes from running a balanced budget to running a budget deficit.
D)   Any of the above events would shift the supply curve from S1 to S2.E) C) and D)
F) All of the above

Question 9

Draw and label a graph showing equilibrium in the market for loanable funds.

Accepted Answer

Market for...

Question 10

In 2013, XYZ Corporation had total earnings of $500 million and XYZ retained 20 percent of its earnings for future investments. If the price of a share of XYZ stock is $70 and if 100 million shares of its stock is outstanding, then what is the price-earnings ratio?

Accepted Answer

A)   6.25
B)   11.2
C)   14.0
D)   17.5E) A) and B)
F) A) and C)

Question 11

Suppose a country had a smaller increase in debt in 2011 than it had in 2010. Then other things the same, we would expect

Accepted Answer

A)   lower interest rates and investment in 2011 than in 2010.
B)   lower interest rates and greater investment in 2011 than in 2010.
C)   higher interest rates and greater investment in 2011 than in 2010.
D)   higher interest rates and lower investment in 2011 than in 2010.E) A) and B)
F) B) and C)

Question 12

If there is surplus of loanable funds, then

Accepted Answer

A)   the supply for loanable funds shifts right and the demand shifts left.
B)   the supply for loanable funds shifts left and the demand shifts right.
C)   neither curve shifts, but the quantity of loanable funds supplied increases and the quantity demanded decreases as the interest rate rises to equilibrium.
D)   neither curve shifts, but the quantity of loanable funds supplied decreases and the quantity demanded increases as the interest rate falls to equilibrium.E) C) and D)
F) B) and C)

Question 13

Suppose that in a closed economy GDP is equal to 20,000, consumption equal to 15,000, government purchases equal 4,000 and taxes equal 3,000. What are private saving, public saving, and national saving?

Accepted Answer

A)   -2,000, 1,000, and 2,000, respectively.
B)   1,000, 2,000, and 3,000, respectively.
C)   2,000, -1,000, and 1,000, respectively.
D)   2,000, 1,000, and 2,000, respectively.E) A) and B)
F) None of the above

Question 14

If a firm sells a total of 100 shares of stock, then

Accepted Answer

A)   the supply of, and demand for, those shares determine the price per share.
B)   each share represents ownership of 1 percent of the firm.
C)   the firm is engaging in equity finance.
D)   All of the above are correct.E) None of the above
F) A) and D)

Question 15

Which of the following statements is correct?

Accepted Answer

A)   Stocks, bonds, and deposits are all similar in that each provides a common medium of exchange.
B)   Most buyers of stocks and bonds prefer those issued by large and familiar companies.
C)   Banks charge borrowers a slightly lower interest rate than they pay to depositors.
D)   None of the above is correct.E) A) and B)
F) None of the above

Question 16

The supply of loanable funds would shift to the right if either

Accepted Answer

A)   tax reforms encouraged greater saving or the budget deficit became smaller.
B)   tax reforms encouraged greater saving or investment tax credits were increased.
C)   the budget deficit became larger or investment tax credits were increased.
D)   the budget deficit became larger or tax reforms discouraged saving.E) A) and B)
F) A) and C)

Question 17

Nastech Pharmaceuticals announced it has developed a nasal spray that would reduce hunger cravings. Other things the same we would expect

Accepted Answer

A)   the demand for existing shares of stock in this company to decrease, so the price would fall.
B)   the demand for existing shares of stock in this company to increase, so the price would rise.
C)   the supply of existing shares of stock in this company to decrease, so the price would fall.
D)   the supply of existing shares of stock in this company to increase, so the price would rise.E) B) and C)
F) A) and B)

Question 18

Suppose a closed economy had public saving of -$1 trillion and private saving of $3 trillion. What are national saving and investment for this country?

Accepted Answer

A)   $2 trillion, $2 trillion
B)   $2 trillion, $3 trillion
C)   $3 trillion, $3 trillion
D)   $4 trillion, $2 trillionE) A) and C)
F) C) and D)

Question 19

Your brother-in-law wants to buy either stock or bonds in Cedar Valley Furniture, which manufactures wooden furniture. He wants your advice on whether to buy stock or bonds. Explain how each of his quotes below should affect his choice between the stock and the bond.
a. "I have reason to believe that people are soon going to find rocking chairs have health benefits."
b. "I would like to tell people I am part owner of Cedar Valley Furniture."
c. "I do not want to take on much risk."

Accepted Answer

a. Presumably, when this happens, unless...

Question 20

At some point during the financial crisis of 2008-2009, people with uninsured deposits at financial institutions withdrew money from their accounts at those institutions. This phenomenon characterized which element of the financial crisis?

Accepted Answer

A)   the decline in confidence in financial institutions
B)   the credit crunch
C)   the economic downturn
D)   the decline in asset pricesE) None of the above
F) All of the above

Exam 8: Saving, Investment, and the Financial System

Suppose government expenditures on goods and services increase, transfers are unchanged, and taxes rise by less than the increase in expenditures. These changes in the government's budget cause

Correct Answer
verified

Suppose a closed economy had public saving of -$1 trillion and private saving of $3 trillion. What are national saving and investment for this country?

Correct Answer
verified

For an imaginary closed economy, T = $5,000; S = $11,000; C = $48,000; and the government is running a budget surplus of $1,000. Then

Correct Answer
verified

Suppose a country had a smaller increase in debt in 2011 than it had in 2010. Then other things the same, we would expect

Correct Answer
verified

If a firm sells a total of 100 shares of stock, then

Correct Answer
verified

In 2013, XYZ Corporation had total earnings of $500 million and XYZ retained 20 percent of its earnings for future investments. If the price of a share of XYZ stock is $70 and if 100 million shares of its stock is outstanding, then what is the price-earnings ratio?

Correct Answer
verified

The supply of loanable funds would shift to the right if either

Correct Answer
verified

Nastech Pharmaceuticals announced it has developed a nasal spray that would reduce hunger cravings. Other things the same we would expect

Correct Answer
verified

When economists refer to investment, they mean the purchasing of stocks and bonds and other types of saving.

Correct Answer
verified

If there is surplus of loanable funds, then

Correct Answer
verified

Which of the following equations represents GDP for an open economy?

Correct Answer
verified

Correct Answer
verified
a. Presumably, when this happens, unless...
View Answer

If, for an imaginary closed economy, investment amounts to $12,000 and the government is running a $2,000 deficit, then private saving must amount to $10,000.

Correct Answer
verified

Draw and label a graph showing equilibrium in the market for loanable funds.

Correct Answer
verified
Market for...
View Answer

Figure 26-1. The figure depicts a demand-for-loanable-funds curve and two supply-of-loanable-funds curves. -Refer to Figure 26-1. Which of the following events would shift the supply curve from S1 to S2?

Correct Answer
verified

For a closed economy, GDP is $12 trillion, consumption is $7 trillion, taxes net of transfers are $3 trillion and the government runs a deficit of $1 trillion. What are private saving and national saving?

Correct Answer
verified

Using a graph representing the market for loanable funds, show and explain what happens to interest rates and investment if the government budget goes from a deficit to a surplus.

Correct Answer
verified
As shown in the graph below, the economy...
View Answer

Which of the following statements is correct?

Correct Answer
verified

At some point during the financial crisis of 2008-2009, people with uninsured deposits at financial institutions withdrew money from their accounts at those institutions. This phenomenon characterized which element of the financial crisis?

Correct Answer
verified

Suppose that in a closed economy GDP is equal to 20,000, consumption equal to 15,000, government purchases equal 4,000 and taxes equal 3,000. What are private saving, public saving, and national saving?

Correct Answer
verified

Exam 8: Saving, Investment, and the Financial System

Suppose government expenditures on goods and services increase, transfers are unchanged, and taxes rise by less than the increase in expenditures. These changes in the government's budget cause

Correct AnswerverifiedShow Answer

Suppose a closed economy had public saving of -$1 trillion and private saving of $3 trillion. What are national saving and investment for this country?

Correct AnswerverifiedShow Answer

For an imaginary closed economy, T = $5,000; S = $11,000; C = $48,000; and the government is running a budget surplus of $1,000. Then

Correct AnswerverifiedShow Answer

Suppose a country had a smaller increase in debt in 2011 than it had in 2010. Then other things the same, we would expect

Correct AnswerverifiedShow Answer

If a firm sells a total of 100 shares of stock, then

Correct AnswerverifiedShow Answer

In 2013, XYZ Corporation had total earnings of $500 million and XYZ retained 20 percent of its earnings for future investments. If the price of a share of XYZ stock is $70 and if 100 million shares of its stock is outstanding, then what is the price-earnings ratio?

Correct AnswerverifiedShow Answer

The supply of loanable funds would shift to the right if either

Correct AnswerverifiedShow Answer

Nastech Pharmaceuticals announced it has developed a nasal spray that would reduce hunger cravings. Other things the same we would expect

Correct AnswerverifiedShow Answer

When economists refer to investment, they mean the purchasing of stocks and bonds and other types of saving.

Correct AnswerverifiedShow Answer

If there is surplus of loanable funds, then

Correct AnswerverifiedShow Answer

Which of the following equations represents GDP for an open economy?

Correct AnswerverifiedShow Answer

Correct Answerverifieda. Presumably, when this happens, unless...View AnswerShow Answer

If, for an imaginary closed economy, investment amounts to $12,000 and the government is running a $2,000 deficit, then private saving must amount to $10,000.

Correct AnswerverifiedShow Answer

Draw and label a graph showing equilibrium in the market for loanable funds.

Correct AnswerverifiedMarket for...View AnswerShow Answer

Figure 26-1. The figure depicts a demand-for-loanable-funds curve and two supply-of-loanable-funds curves. -Refer to Figure 26-1. Which of the following events would shift the supply curve from S1 to S2?

Correct AnswerverifiedShow Answer

For a closed economy, GDP is $12 trillion, consumption is $7 trillion, taxes net of transfers are $3 trillion and the government runs a deficit of $1 trillion. What are private saving and national saving?

Correct AnswerverifiedShow Answer

Using a graph representing the market for loanable funds, show and explain what happens to interest rates and investment if the government budget goes from a deficit to a surplus.

Correct AnswerverifiedAs shown in the graph below, the economy...View AnswerShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

At some point during the financial crisis of 2008-2009, people with uninsured deposits at financial institutions withdrew money from their accounts at those institutions. This phenomenon characterized which element of the financial crisis?

Correct AnswerverifiedShow Answer

Suppose that in a closed economy GDP is equal to 20,000, consumption equal to 15,000, government purchases equal 4,000 and taxes equal 3,000. What are private saving, public saving, and national saving?

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
a. Presumably, when this happens, unless...
View Answer

Correct Answer
verified

Correct Answer
verified
Market for...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
As shown in the graph below, the economy...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified