Question 1

The economy's two most important financial markets are

Accepted Answer

A)   the investment market and the saving market.
B)   the bond market and the stock market.
C)   banks and the stock market.
D)   financial markets and financial institutions.E) B) and D)
F) A) and D)

Question 2

List three characteristics of a bond that would make its interest rate higher than otherwise.

Accepted Answer

it has a longer term to maturi...

Question 3

Which of the following would necessarily increase the equilibrium interest rate?

Accepted Answer

A)   The demand for and the supply of loanable funds shift right.
B)   The demand for and the supply of loanable funds shift left.
C)   The demand for loanable funds shifts right and the supply of loanable funds shifts left.
D)   The demand for loanable funds shifts left and the supply of loanable funds shifts right.E) A) and B)
F) A) and C)

Question 4

Figure 26-1. The figure depicts a demand-for-loanable-funds curve and two supply-of-loanable-funds curves. 
-Refer to Figure 26-1. What is measured along the vertical axis of the graph?

Accepted Answer

A)   the nominal interest rate
B)   the real interest rate
C)   the quantity of investment
D)   the quantity of savingE) None of the above
F) A) and D)

Question 5

When tax code changes increase investment incentives, the _____ for loanable funds curve shifts to the _____. This results in an) _____ in the interest rate and an) _____ in investment.

Accepted Answer

demand, ri...

Question 6

Index funds

Accepted Answer

A)   buy all the stocks in a given stock index.
B)   promise to beat the market by a certain percentage known as an index.
C)   provide a return that is adjusted for changes in the consumer price index.
D)   buy industries within a particular category of the North American Industry Classification System.E) B) and D)
F) A) and D)

Question 7

The country of Yokovia does not trade with any other country. Its GDP is $20 billion. Its government collects $2 billion in taxes. Consumption equals $15 billion and investment equals $2 billion. What is public saving in Yokovia, and what is the value of the goods and services purchased by the government of Yokovia?

Accepted Answer

A)   -$2 billion and $1 billion.
B)   $1 billion and $1 billion.
C)   -$1 billion and $3 billion.
D)   -$2 billion and $3 billion.E) B) and C)
F) All of the above

Question 8

The demand for loanable funds comes from saving and the supply of loanable funds comes from investment.

Accepted Answer

A) True 
 B)False

Question 9

If the government budget deficit increases, which curve in the market for loanable funds shifts, which direction does it shift, and what happens to the interest rate?

Accepted Answer

The supply of loanab...

Question 10

Morgan, a financial advisor, has told her clients the following things. Which of her statements is not correct?

Accepted Answer

A)   "U.S. government bonds generally pay a higher rate of interest than corporate bonds."
B)   "The interest received on corporate bonds is taxable."
C)   "U.S. government bonds have the lowest default risk."
D)   "If you purchase a municipal bond, you can sell it before it matures."E) C) and D)
F) B) and C)

Question 11

According to the definitions of national saving and private saving, if Y, C, and G remained the same, an increase in taxes would

Accepted Answer

A)   raise both national saving and private saving.
B)   raise national saving and reduce private saving.
C)   leave national saving and private saving unchanged.
D)   leave national saving unchanged and reduce private saving.E) None of the above
F) C) and D)

Question 12

Other things the same, bonds are likely to have higher interest rates if they have

Accepted Answer

A)   tax exemptions and short terms.
B)   tax exemptions and long terms.
C)   no tax exemptions and short terms.
D)   no tax exemptions and long terms.E) A) and D)
F) None of the above

Question 13

Identify each of the following acts as representing either saving or investment.
a. Fred uses some of his income to buy government bonds.
b. Julie takes some of her income and buys mutual funds.
c. Alex purchases a new truck for his delivery business using borrowed funds.
d. Elaine uses some of her income to buy stock in a major corporation.
e. Henrietta hires a builder to construct a new building for her bicycle shop.

Accepted Answer

a. Fred is saving.
b. Julie is...

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

Other things the same, an increase in the budget deficit

Accepted Answer

A)   shifts the demand for loanable funds right, so the interest rate rises.
B)   shifts the demand for loanable funds left, so the interest rate falls.
C)   shifts the supply of loanable funds right, so the interest rate falls.
D)   shifts the supply of loanable funds left, so the interest rate rises.E) A) and B)
F) A) and C)

Question 16

An increase in the demand for loanable funds increases the equilibrium interest rate and increases the equilibrium level of saving.

Accepted Answer

A) True 
 B)False

Question 17

Figure 26-2. The figure depicts a supply-of-loanable-funds curve and two demand-for-loanable-funds curves. 
-Refer to Figure 26-2. What is measured along the horizontal axis of the graph?

Accepted Answer

A)   the quantity of loanable funds
B)   the size of the government budget deficit or surplus
C)   the real interest rate
D)   the nominal interest rateE) All of the above
F) B) and C)

Question 18

If Congress increased the tax rate on interest income, investment

Accepted Answer

A)   would increase and saving would decrease.
B)   would decrease and saving would increase.
C)   and saving would increase.
D)   and saving would decrease.E) B) and C)
F) B) and D)

Question 19

In a closed economy taxes are $750 billion, government transfers are $400 billion, government expenditures are $500 billion, and investment is $400 billion. What are private saving, public saving and national saving?

Accepted Answer

Private saving is $550 billion...

Question 20

The old adage, "Don't put all your eggs in one basket," is very similar to a modern bit of advice concerning financial matters:

Accepted Answer

A)   "Buy low­risk bonds."
B)   "Use a medium of exchange."
C)   "Diversify."
D)   "Intermediate."E) A) and D)
F) A) and B)

Exam 18: Saving, Investment, and the Financial System

In a closed economy taxes are $750 billion, government transfers are $400 billion, government expenditures are $500 billion, and investment is $400 billion. What are private saving, public saving and national saving?

Correct Answer
verified
Private saving is $550 billion...
View Answer

Index funds

Correct Answer
verified

Morgan, a financial advisor, has told her clients the following things. Which of her statements is not correct?

Correct Answer
verified

The demand for loanable funds comes from saving and the supply of loanable funds comes from investment.

Correct Answer
verified

Correct Answer
verified
a. Fred is saving.
b. Julie is...
View Answer

Other things the same, an increase in the budget deficit

Correct Answer
verified

According to the definitions of national saving and private saving, if Y, C, and G remained the same, an increase in taxes would

Correct Answer
verified

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

Correct Answer
verified

Figure 26-1. The figure depicts a demand-for-loanable-funds curve and two supply-of-loanable-funds curves. -Refer to Figure 26-1. What is measured along the vertical axis of the graph?

Correct Answer
verified

The old adage, "Don't put all your eggs in one basket," is very similar to a modern bit of advice concerning financial matters:

Correct Answer
verified

Correct Answer
verified

Other things the same, bonds are likely to have higher interest rates if they have

Correct Answer
verified

An increase in the demand for loanable funds increases the equilibrium interest rate and increases the equilibrium level of saving.

Correct Answer
verified

When tax code changes increase investment incentives, the ___ for loanable funds curve shifts to the _. This results in an) _ in the interest rate and an) ___ in investment.

Correct Answer
verified
demand, ri...
View Answer

If the government budget deficit increases, which curve in the market for loanable funds shifts, which direction does it shift, and what happens to the interest rate?

Correct Answer
verified
The supply of loanab...
View Answer

List three characteristics of a bond that would make its interest rate higher than otherwise.

Correct Answer
verified
it has a longer term to maturi...
View Answer

The economy's two most important financial markets are

Correct Answer
verified

If Congress increased the tax rate on interest income, investment

Correct Answer
verified

Which of the following would necessarily increase the equilibrium interest rate?

Correct Answer
verified

Figure 26-2. The figure depicts a supply-of-loanable-funds curve and two demand-for-loanable-funds curves. -Refer to Figure 26-2. What is measured along the horizontal axis of the graph?

Correct Answer
verified

Exam 18: Saving, Investment, and the Financial System

In a closed economy taxes are $750 billion, government transfers are $400 billion, government expenditures are $500 billion, and investment is $400 billion. What are private saving, public saving and national saving?

Correct AnswerverifiedPrivate saving is $550 billion...View AnswerShow Answer

Index funds

Correct AnswerverifiedShow Answer

Morgan, a financial advisor, has told her clients the following things. Which of her statements is not correct?

Correct AnswerverifiedShow Answer

The demand for loanable funds comes from saving and the supply of loanable funds comes from investment.

Correct AnswerverifiedShow Answer

Correct Answerverifieda. Fred is saving.b. Julie is...View AnswerShow Answer

Other things the same, an increase in the budget deficit

Correct AnswerverifiedShow Answer

According to the definitions of national saving and private saving, if Y, C, and G remained the same, an increase in taxes would

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow 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. What is measured along the vertical axis of the graph?

Correct AnswerverifiedShow Answer

The old adage, "Don't put all your eggs in one basket," is very similar to a modern bit of advice concerning financial matters:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Other things the same, bonds are likely to have higher interest rates if they have

Correct AnswerverifiedShow Answer

An increase in the demand for loanable funds increases the equilibrium interest rate and increases the equilibrium level of saving.

Correct AnswerverifiedShow Answer

When tax code changes increase investment incentives, the _____ for loanable funds curve shifts to the _____. This results in an) _____ in the interest rate and an) _____ in investment.

Correct Answerverifieddemand, ri...View AnswerShow Answer

If the government budget deficit increases, which curve in the market for loanable funds shifts, which direction does it shift, and what happens to the interest rate?

Correct AnswerverifiedThe supply of loanab...View AnswerShow Answer

List three characteristics of a bond that would make its interest rate higher than otherwise.

Correct Answerverifiedit has a longer term to maturi...View AnswerShow Answer

The economy's two most important financial markets are

Correct AnswerverifiedShow Answer

If Congress increased the tax rate on interest income, investment

Correct AnswerverifiedShow Answer

Which of the following would necessarily increase the equilibrium interest rate?

Correct AnswerverifiedShow Answer

Figure 26-2. The figure depicts a supply-of-loanable-funds curve and two demand-for-loanable-funds curves. -Refer to Figure 26-2. What is measured along the horizontal axis of the graph?

Correct AnswerverifiedShow Answer

Correct Answer
verified
Private saving is $550 billion...
View Answer

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Correct Answer
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Correct Answer
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Correct Answer
verified
a. Fred is saving.
b. Julie is...
View Answer

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
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Correct Answer
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Correct Answer
verified

Correct Answer
verified

When tax code changes increase investment incentives, the ___ for loanable funds curve shifts to the _. This results in an) _ in the interest rate and an) ___ in investment.

Correct Answer
verified
demand, ri...
View Answer

Correct Answer
verified
The supply of loanab...
View Answer

Correct Answer
verified
it has a longer term to maturi...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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