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Exam 26: Saving, Investment, and the Financial System

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Question 31

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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.

A) True
B) False

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Question 32

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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?

A) The quantity of loanable funds
B) The size of the government budget deficit or surplus
C) The interest rate
D) Private saving

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

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Question 33

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Skeptics of government policy to reduce taxes on saving argue that it would primarily benefit the rich.

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

Mia buys 4,000 shares of stock issued by Greg Brewing. In turn, Greg uses the funds to buy new machinery for one of its breweries.

When the government's budget deficit increases the government is borrowing

When tax code changes reduce investment incentives, the _____ for loanable funds curve shifts to the _____. This results in a(n) _____ in the interest rate and a(n) _____ in investment.

In the national income accounting identity showing the equality between national saving and investment, what are the algebraic expressions for private saving and public saving?

Other things the same, the higher the rate of saving and investment in a country, the higher will be the standard of living in the future.

To state that public saving is equal to investment, for a closed economy, is to state an accounting identity.

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

In national income accounting, we use which of the following pairs of terms interchangeably?

Which of the following counts as part of the supply of loanable funds?

If the quantity of loanable funds demanded exceeds the quantity of loanable funds supplied, there is a

What happens to desired investment spending if the interest rate rises? Is this response relevant to the supply of loanable funds curve or the demand for loanable funds curve?

Other things the same, which bond would you expect to pay the lowest interest rate?

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 households' decision to save less?

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

As chief financial officer you sell newly issued bonds on behalf of your firm. Your firm is

If, for an imaginary closed economy, investment amounts to $10,000 and the government is running a $2,500 deficit, then private saving must amount to $12,500.