Question 1

In the small closed economy of San Lorena, the currency is the denar. Statistics for last year show that private saving was 60 billion denars, taxes were 80 billion denars, government purchases of goods and services were 70 billion denars, there were no transfer payments by the government, and GDP was 400 billion denars. What were consumption and investment in San Lorena?

Accepted Answer

A)   270 billion denars, 50 billion denars
B)   250 billion denars, 60 billion denars
C)   260 billion denars, 70 billion denars
D)   None of the above is correct.E) B) and D)
F) None of the above

Question 2

The slope of the demand for loanable funds curve represents the

Accepted Answer

A)   positive relation between the real interest rate and investment.
B)   negative relation between the real interest rate and investment.
C)   positive relation between the real interest rate and saving.
D)   negative relation between the real interest rate and saving.E) A) and C)
F) A) and B)

Question 3

Which of the following events could explain a decrease in interest rates together with an increase in investment?

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)   None of the above is correct.E) A) and B)
F) A) and C)

Question 4

The two most important financial markets are the _____ market and the _____ market.

Accepted Answer

bond, stoc...

Question 5

The Dow Jones Industrial Average is now based on the prices of the stocks of

Accepted Answer

A)   30 major U.S. corporations.
B)   100 major U.S. corporations.
C)   500 representative U.S. corporations.
D)   1,000 representative U.S. corporations.E) B) and D)
F) B) and C)

Question 6

Interest rates fall and investment falls. Which of the following could explain these changes?

Accepted Answer

A)   The government goes from a surplus to a deficit.
B)   The government repeals an investment tax credit.
C)   The government replaces a consumption tax with an income tax.
D)   None of the above is correct.E) C) and D)
F) All of the above

Question 7

Which of the following is correct?

Accepted Answer

A)   In the national income accounts, investment and private saving refer to the same thing.
B)   In a closed economy if national saving is greater than zero, then everyone must be saving.
C)   The financial system channels funds from savers to borrowers.
D)   People whose consumption exceeds their income are savers.E) A) and B)
F) B) and D)

Question 8

The price of a stock will rise if

Accepted Answer

A)   the managers of a stock exchange decide the price should be higher.
B)   the demand for the stock rises.
C)   the supply of the stock rises.
D)   None of the above are correct.E) B) and D)
F) B) and C)

Question 9

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) All of the above
F) C) and D)

Question 10

In which of the following cases would it necessarily be true that national saving and private saving are equal for a closed economy?

Accepted Answer

A)   Private saving is equal to government expenditures.
B)   Public saving is equal to investment.
C)   After paying their taxes and paying for their consumption, households have nothing left.
D)   The government's tax revenue is equal to its expenditures.E) A) and C)
F) A) and B)

Question 11

Which of the following statements is correct?

Accepted Answer

A)   As a group, economists see no purpose in distinguishing between the nominal interest rate and the real interest rate.
B)   The interest rate that is usually reported is the nominal interest rate.
C)   If the nominal interest rate increases and the inflation rate remains unchanged, then the real interest rate decreases.
D)   All of the above are correct.E) B) and C)
F) A) and B)

Question 12

A policy that induces people to save more shifts

Accepted Answer

A)   the supply of loanable funds and raises interest rates.
B)   the supply of loanable funds and reduces interest rates.
C)   the demand for loanable funds and raises interest rates.
D)   the demand for loanable funds and reduces interest rates.E) A) and B)
F) B) and D)

Question 13

Figure 26-3. The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves. 
-Refer to Figure 26-3. Which of the following movements would be consistent with the government budget going from deficit to surplus and the simultaneous enactment of an investment tax credit?

Accepted Answer

A)   a movement from Point A to Point C
B)   a movement from Point B to Point A
C)   a movement from Point B to Point F
D)   a movement from Point C to Point BE) A) and C)
F) A) and D)

Question 14

In a closed economy, if Y and T remained the same, but G rose and C fell but by less than the rise in G, what would happen to public and national saving?

Accepted Answer

A)   public and national saving would rise
B)   public and national saving would fall
C)   public saving would rise and national saving would fall
D)   public saving would fall and national saving would riseE) A) and C)
F) None of the above

Question 15

A particular stock pays an annual dividend of $2 per share and the annual dividend yield is 2.5 percent. The price of a share of this stock is

Accepted Answer

A)   $2.05.
B)   $5.00.
C)   $80.00
D)   $50.00.E) None of the above
F) C) and D)

Question 16

Suppose the government were to replace the income tax with a consumption tax so that interest on savings was not taxed. The result would be that the interest rate

Accepted Answer

A)   and investment both would increase.
B)   and investment both would decrease.
C)   would increase and investment would decrease.
D)   would decrease and investment would increase.E) All of the above
F) A) and B)

Question 17

Which of the following is not correct?

Accepted Answer

A)   By saving a larger portion of its GDP, a country can raise its output per worker.
B)   Savers supply their money to the financial system with the expectation that they will get it back with interest at a later date.
C)   Financial intermediaries are the only type of financial institution.
D)   The financial system helps match people's saving with other people's borrowing.E) A) and C)
F) A) and B)

Question 18

Congress and the President allow people to make greater contributions to tax-deferred savings accounts. Which curve in the market for loanable funds would shift, which direction would it shift, what would happen to the interest rate, and what would happen to investment spending?

Accepted Answer

The supply of loanable funds w...

Question 19

What is the main function of the financial system?

Accepted Answer

Matching s...

Question 20

The conventions of national income accounting imply that saving and investment are equal for the economy as a whole and for individual households and firms.

Accepted Answer

A) True 
 B)False

Exam 18: Saving, Investment, and the Financial System

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

The slope of the demand for loanable funds curve represents the

Correct Answer
verified

Correct Answer
verified

Which of the following events could explain a decrease in interest rates together with an increase in investment?

Correct Answer
verified

The two most important financial markets are the _ market and the _ market.

Correct Answer
verified
bond, stoc...
View Answer

In which of the following cases would it necessarily be true that national saving and private saving are equal for a closed economy?

Correct Answer
verified

Suppose the government were to replace the income tax with a consumption tax so that interest on savings was not taxed. The result would be that the interest rate

Correct Answer
verified

Which of the following is correct?

Correct Answer
verified

Which of the following statements is correct?

Correct Answer
verified

A particular stock pays an annual dividend of $2 per share and the annual dividend yield is 2.5 percent. The price of a share of this stock is

Correct Answer
verified

The price of a stock will rise if

Correct Answer
verified

Which of the following is not correct?

Correct Answer
verified

In a closed economy, if Y and T remained the same, but G rose and C fell but by less than the rise in G, what would happen to public and national saving?

Correct Answer
verified

Congress and the President allow people to make greater contributions to tax-deferred savings accounts. Which curve in the market for loanable funds would shift, which direction would it shift, what would happen to the interest rate, and what would happen to investment spending?

Correct Answer
verified
The supply of loanable funds w...
View Answer

The conventions of national income accounting imply that saving and investment are equal for the economy as a whole and for individual households and firms.

Correct Answer
verified

Interest rates fall and investment falls. Which of the following could explain these changes?

Correct Answer
verified

The Dow Jones Industrial Average is now based on the prices of the stocks of

Correct Answer
verified

A policy that induces people to save more shifts

Correct Answer
verified

Figure 26-3. The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves. -Refer to Figure 26-3. Which of the following movements would be consistent with the government budget going from deficit to surplus and the simultaneous enactment of an investment tax credit?

Correct Answer
verified

What is the main function of the financial system?

Correct Answer
verified
Matching s...
View Answer

Exam 18: Saving, Investment, and the Financial System

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

The slope of the demand for loanable funds curve represents the

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following events could explain a decrease in interest rates together with an increase in investment?

Correct AnswerverifiedShow Answer

The two most important financial markets are the _____ market and the _____ market.

Correct Answerverifiedbond, stoc...View AnswerShow Answer

In which of the following cases would it necessarily be true that national saving and private saving are equal for a closed economy?

Correct AnswerverifiedShow Answer

Suppose the government were to replace the income tax with a consumption tax so that interest on savings was not taxed. The result would be that the interest rate

Correct AnswerverifiedShow Answer

Which of the following is correct?

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

A particular stock pays an annual dividend of $2 per share and the annual dividend yield is 2.5 percent. The price of a share of this stock is

Correct AnswerverifiedShow Answer

The price of a stock will rise if

Correct AnswerverifiedShow Answer

Which of the following is not correct?

Correct AnswerverifiedShow Answer

In a closed economy, if Y and T remained the same, but G rose and C fell but by less than the rise in G, what would happen to public and national saving?

Correct AnswerverifiedShow Answer

Congress and the President allow people to make greater contributions to tax-deferred savings accounts. Which curve in the market for loanable funds would shift, which direction would it shift, what would happen to the interest rate, and what would happen to investment spending?

Correct AnswerverifiedThe supply of loanable funds w...View AnswerShow Answer

The conventions of national income accounting imply that saving and investment are equal for the economy as a whole and for individual households and firms.

Correct AnswerverifiedShow Answer

Interest rates fall and investment falls. Which of the following could explain these changes?

Correct AnswerverifiedShow Answer

The Dow Jones Industrial Average is now based on the prices of the stocks of

Correct AnswerverifiedShow Answer

A policy that induces people to save more shifts

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

What is the main function of the financial system?

Correct AnswerverifiedMatching s...View AnswerShow Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
verified

The two most important financial markets are the _ market and the _ market.

Correct Answer
verified
bond, stoc...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
verified

Correct Answer
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Correct Answer
verified
The supply of loanable funds w...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified
Matching s...
View Answer