Question 1

The indirect provision of funds by savers to borrowers is accomplished by

Accepted Answer

A)   banks and other financial markets.
B)   banks and other financial intermediaries.
C)   stock markets and other financial markets.
D)   All of the above are correct.E) B) and C)
F) A) and C)

Question 2

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) None of the above

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

A certificate of indebtedness that specifies the obligations of the borrower to the holder is called a

Accepted Answer

A)   bond.
B)   stock.
C)   mutual fund.
D)   All of the above are correct.E) None of the above
F) All of the above

Question 5

If the tax revenue of the federal government is less than its spending, then the federal government necessarily

Accepted Answer

A)   runs a budget deficit.
B)   runs a budget surplus.
C)   runs a national debt.
D)   will increase taxes.E) A) and B)
F) C) and D)

Question 6

Higher education subsidies in the form of the federal government's student loan program

Accepted Answer

A)   induce more people to attend colleges and universities.
B)   keep interest rates low on student loans.
C)   cause lenders to take on more risk.
D)   All of the above are correct.E) B) and D)
F) C) and D)

Question 7

If there is a shortage in the market for loanable funds, what happens to desired saving and desired investment as the interest rate moves to its equilibrium value?

Accepted Answer

A)   desired saving and desired investment both fall
B)   desired saving and desired investment both rise
C)   desired saving falls and desired investment rises
D)   desired saving rises and desired investment fallsE) A) and B)
F) C) and D)

Question 8

If a firm wants to borrow it can

Accepted Answer

A)   supply bonds by selling them.
B)   supply bonds by buying them.
C)   demand bonds by selling them.
D)   demand bonds by buying them.E) All of the above
F) A) and B)

Question 9

For an imaginary economy, when the real interest rate is 5 percent, the quantity of loanable funds demanded is $100,000 and the quantity of loanable funds supplied is $100,000. Currently, the nominal interest rate is 6 percent and the inflation rate is 2 percent. Currently,

Accepted Answer

A)   the market for loanable funds is in equilibrium.
B)   the quantity of loanable funds supplied exceeds the quantity of loanable funds demanded, and as a result the real interest rate will rise.
C)   the quantity of loanable funds supplied exceeds the quantity of loanable funds demanded, and as a result the real interest rate will fall.
D)   the quantity of loanable funds demanded exceeds the quantity of loanable funds supplied, and as a result the real interest rate will rise.E) A) and D)
F) A) and C)

Question 10

Mandy purchases 68.2 shares of a mutual fund for $1,500. Cassie's purchase of these shares contributes $1,500 to which magnitude in the identity Y = C + I + G?

Accepted Answer

A)   C
B)   I
C)   G
D)   None of the above are correct.E) None of the above
F) A) and B)

Question 11

Larry buys stock in A to Z Express Company. Curly Corporation builds a new factory. Whose transaction would be an act of investment in the language of macroeconomics?

Accepted Answer

A)   only Larry's
B)   only Curly Corporation's
C)   Larry's and Curly Corporation's
D)   neither Larry's nor Curly Corporation'sE) A) and B)
F) None of the above

Question 12

If Canada goes from a large budget deficit to a small budget deficit, it will

Accepted Answer

A)   increase private saving and so shift the supply of loanable funds right.
B)   increase investment and so shift the demand for loanable funds right.
C)   increase public saving and so shift the supply of loanable funds right.
D)   reduce national saving and shift the supply left.E) A) and C)
F) A) and B)

Question 13

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 14

When tax code changes increase saving incentives, the interest rate will and investment will .

Accepted Answer

The answer of When tax code changes increase saving incentives,...

Question 15

The single most important piece of information about a stock is its

Accepted Answer

A)   term.
B)   dividend.
C)   daily volume.
D)   price.E) A) and D)
F) None of the above

Question 16

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

Question 17

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) None of the above

Question 18

Table 26-3. The following table presents information about a closed economy whose market for loanable funds is in equilibrium. 
-Refer to Table 26-3. Determine the quantity of loanable funds demanded.

Accepted Answer

A)   $1.8 trillion
B)   $1.6 trillion
C)   $1.4 trillion
D)   $0.8 trillionE) B) and C)
F) A) and D)

Question 19

For an imaginary economy, when the real interest rate is 5 percent, the quantity of loanable funds demanded is $1,000 and the quantity of loanable funds supplied is $1,000. Currently, the nominal interest rate is 9 percent and the inflation rate is 2 percent. Currently,

Accepted Answer

A)   the market for loanable funds is in equilibrium.
B)   the quantity of loanable funds supplied exceeds the quantity of loanable funds demanded, and as a result the real interest rate will rise.
C)   the quantity of loanable funds supplied exceeds the quantity of loanable funds demanded, and as a result the real interest rate will fall.
D)   the quantity of loanable funds demanded exceeds the quantity of loanable funds supplied, and as a result the real interest rate will rise.E) A) and B)
F) B) and D)

Question 20

Consider three different closed economies with the following national income statistics. Country A has taxes of $40 billion, transfers of $20 billion, and government expenditures on goods and services of $30 billion. County B has private savings of $60 billion, and investment expenditures of $40 billion. Country C has GDP of $300 billion, investment of $90, consumption of $180 billion, taxes of $60 billion and transfers of $20 billion. From this information, we know that

Accepted Answer

A)   country A has the largest government budget deficit.
B)   country B has the largest government budget deficit.
C)   country C has the largest government budget deficit.
D)   The government budget deficit is equal in all three countries.E) A) and D)
F) C) and D)

Exam 26: Saving, Investment, and the Financial System

For an imaginary economy, when the real interest rate is 5 percent, the quantity of loanable funds demanded is $100,000 and the quantity of loanable funds supplied is $100,000. Currently, the nominal interest rate is 6 percent and the inflation rate is 2 percent. Currently,

Correct Answer
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Which of the following is correct?

Correct Answer
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Larry buys stock in A to Z Express Company. Curly Corporation builds a new factory. Whose transaction would be an act of investment in the language of macroeconomics?

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

If the tax revenue of the federal government is less than its spending, then the federal government necessarily

Correct Answer
verified

When tax code changes increase saving incentives, the interest rate will and investment will .

Correct Answer
verified

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

If Canada goes from a large budget deficit to a small budget deficit, it will

Correct Answer
verified

Higher education subsidies in the form of the federal government's student loan program

Correct Answer
verified

Mandy purchases 68.2 shares of a mutual fund for $1,500. Cassie's purchase of these shares contributes $1,500 to which magnitude in the identity Y = C + I + G?

Correct Answer
verified

The indirect provision of funds by savers to borrowers is accomplished by

Correct Answer
verified

If a firm wants to borrow it can

Correct Answer
verified

The single most important piece of information about a stock is its

Correct Answer
verified

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

Correct Answer
verified

A certificate of indebtedness that specifies the obligations of the borrower to the holder is called a

Correct Answer
verified

For an imaginary economy, when the real interest rate is 5 percent, the quantity of loanable funds demanded is $1,000 and the quantity of loanable funds supplied is $1,000. Currently, the nominal interest rate is 9 percent and the inflation rate is 2 percent. Currently,

Correct Answer
verified

Table 26-3. The following table presents information about a closed economy whose market for loanable funds is in equilibrium. -Refer to Table 26-3. Determine the quantity of loanable funds demanded.

Correct Answer
verified

If there is a shortage in the market for loanable funds, what happens to desired saving and desired investment as the interest rate moves to its equilibrium value?

Correct Answer
verified

Exam 26: Saving, Investment, and the Financial System

For an imaginary economy, when the real interest rate is 5 percent, the quantity of loanable funds demanded is $100,000 and the quantity of loanable funds supplied is $100,000. Currently, the nominal interest rate is 6 percent and the inflation rate is 2 percent. Currently,

Correct AnswerverifiedShow Answer

Which of the following is correct?

Correct AnswerverifiedShow Answer

Larry buys stock in A to Z Express Company. Curly Corporation builds a new factory. Whose transaction would be an act of investment in the language of macroeconomics?

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

If the tax revenue of the federal government is less than its spending, then the federal government necessarily

Correct AnswerverifiedShow Answer

When tax code changes increase saving incentives, the interest rate will and investment will .

Correct AnswerverifiedShow Answer

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

If Canada goes from a large budget deficit to a small budget deficit, it will

Correct AnswerverifiedShow Answer

Higher education subsidies in the form of the federal government's student loan program

Correct AnswerverifiedShow Answer

Mandy purchases 68.2 shares of a mutual fund for $1,500. Cassie's purchase of these shares contributes $1,500 to which magnitude in the identity Y = C + I + G?

Correct AnswerverifiedShow Answer

The indirect provision of funds by savers to borrowers is accomplished by

Correct AnswerverifiedShow Answer

If a firm wants to borrow it can

Correct AnswerverifiedShow Answer

The single most important piece of information about a stock is its

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A certificate of indebtedness that specifies the obligations of the borrower to the holder is called a

Correct AnswerverifiedShow Answer

For an imaginary economy, when the real interest rate is 5 percent, the quantity of loanable funds demanded is $1,000 and the quantity of loanable funds supplied is $1,000. Currently, the nominal interest rate is 9 percent and the inflation rate is 2 percent. Currently,

Correct AnswerverifiedShow Answer

Table 26-3. The following table presents information about a closed economy whose market for loanable funds is in equilibrium. -Refer to Table 26-3. Determine the quantity of loanable funds demanded.

Correct AnswerverifiedShow Answer

If there is a shortage in the market for loanable funds, what happens to desired saving and desired investment as the interest rate moves to its equilibrium value?

Correct AnswerverifiedShow Answer

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