Question 1

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 shows the effects of the government going from a budget surplus to a budget deficit?

Accepted Answer

A)   a movement from Point A to Point B
B)   a movement from Point B to Point A
C)   a movement from Point A to Point F
D)   a movement from Point B to Point CE) None of the above
F) A) and B)

Question 2

Who accepts all of the risk associated with a mutual fund's portfolio of stocks and/or bonds?

Accepted Answer

A)   the fund's managers
B)   the fund's shareholders
C)   the federal government
D)   the corporations that originally issued the stocks and/or bonds held by the fundE) A) and D)
F) B) and C)

Question 3

If a firm's price­earnings ratio is relatively low, then it might be an indication that

Accepted Answer

A)   the demand for the stock is relatively high.
B)   the supply of the stock is relatively low.
C)   people expect the firm's earnings to rise.
D)   people expect the firm's earnings to fall.E) None of the above
F) A) and B)

Question 4

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 B)
F) A) and D)

Question 5

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 private and national saving?

Accepted Answer

A)   private and national saving would rise
B)   private and national saving would fall
C)   private saving would rise and national saving would fall
D)   private saving would fall and national saving would riseE) B) and D)
F) A) and C)

Question 6

A higher interest rate makes less attractive. Therefore the quantity of loanable funds demanded decreases.

Accepted Answer

The answer of A higher interest rate makes less attractive....

Question 7

If there is a surplus of loanable funds, then

Accepted Answer

A)   the quantity demanded is greater than the quantity supplied and the interest rate will rise.
B)   the quantity demanded is greater than the quantity supplied and the interest rate will fall.
C)   the quantity supplied is greater than the quantity demanded and the interest rate will rise.
D)   the quantity supplied is greater than the quantity demanded and the interest rate will fall.E) B) and C)
F) A) and C)

Question 8

Joan uses some of her income to buy mutual fund shares. A macroeconomist refers to Joan's purchase as investment.

Accepted Answer

A) True 
 B)False

Question 9

By definition, government purchases and taxes are zero for a closed economy.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following would be included as investment in the GDP accounts?

Accepted Answer

A)   the government buys goods from another country
B)   someone buys stock in an American company
C)   a firm increases its capital stock
D)   All of the above are correct.E) A) and D)
F) None of the above

Question 11

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) B) and C)
F) A) and C)

Question 12

A government budget deficit affects the supply of loanable funds, rather than the demand for loanable funds, because

Accepted Answer

A)   in our model of the loanable funds market, we define "loanable funds" as the flow of resources available to fund private investment.
B)   in our model of the loanable funds market, we define "loanable funds" as the flow of resources available from private saving.
C)   markets for government debt are fundamentally different from markets for private debt.
D)   of our assumption that the economy is closed.E) None of the above
F) A) and C)

Question 13

Which of the following bonds has the highest interest rate?

Accepted Answer

A)   a high credit risk and a short term.
B)   a low credit risk and a short term.
C)   a long term and a high credit risk.
D)   a long term and a low credit risk.E) A) and B)
F) A) and C)

Question 14

Which of the following could explain a decrease in the equilibrium interest rate and an increase in the equilibrium quantity of loanable funds?

Accepted Answer

A)   The demand for loanable funds shifted rightward.
B)   The demand for loanable funds shifted leftward.
C)   The supply of loanable funds shifted rightward.
D)   The supply of loanable funds shifted leftward.E) A) and C)
F) A) and D)

Question 15

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) A) and B)
F) B) and D)

Question 16

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

Question 17

In 2013, ABC Corporation had total earnings of $200 million and 40 million shares of the corporation's stock were outstanding. If the price-earnings ratio for ABC is 20, then what is the price of a share of its stock?

Accepted Answer

A)   $5
B)   b. $10
C)   c. $80
D)   $100E) None of the above
F) A) and B)

Question 18

In a closed economy private saving is $500 billion and the government budget deficit is $100 billion. What is investment?

Accepted Answer

The answer of In a closed economy private saving is...

Question 19

Other things the same, the effects of an increase in transfer payments on the government's budget deficit will lead to

Accepted Answer

A)   greater investment.
B)   a higher interest rate.
C)   higher public saving.
D)   All of the above are correct.E) B) and D)
F) B) and C)

Question 20

Lenders sell bonds and borrowers buy them.

Accepted Answer

A) True 
 B)False

Exam 13: Saving, Investment, and the Financial System

By definition, government purchases and taxes are zero for a closed economy.

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In 2013, ABC Corporation had total earnings of $200 million and 40 million shares of the corporation's stock were outstanding. If the price-earnings ratio for ABC is 20, then what is the price of a share of its stock?

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In a closed economy private saving is $500 billion and the government budget deficit is $100 billion. What is investment?

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Which of the following could explain a decrease in the equilibrium interest rate and an increase in the equilibrium quantity of loanable funds?

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

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Which of the following would be included as investment in the GDP accounts?

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If a firm's price­earnings ratio is relatively low, then it might be an indication that

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Which of the following is correct?

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A higher interest rate makes less attractive. Therefore the quantity of loanable funds demanded decreases.

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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 shows the effects of the government going from a budget surplus to a budget deficit?

Correct AnswerverifiedShow Answer

A government budget deficit affects the supply of loanable funds, rather than the demand for loanable funds, because

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If there is a surplus of loanable funds, then

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Which of the following bonds has the highest interest rate?

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Index funds

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Other things the same, the effects of an increase in transfer payments on the government's budget deficit will lead to

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Lenders sell bonds and borrowers buy them.

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Joan uses some of her income to buy mutual fund shares. A macroeconomist refers to Joan's purchase as investment.

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Who accepts all of the risk associated with a mutual fund's portfolio of stocks and/or bonds?

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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 private and national saving?

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If a firm's priceearnings ratio is relatively low, then it might be an indication that

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