Question 1

The sale of bonds

Accepted Answer

A)  and stocks to raise money is called debt finance.
B)  and stocks to raise money is called equity finance.
C)  to raise money is debt finance and the sale of stocks to raise funds is equity finance.
D)  to raise money is equity finance and the sale of stocks to raise funds is debt finance.E) B) and C)
F) A) and D)

Question 2

Suppose that in a closed economy GDP is equal to $35,000, consumption equal to $16,000, government purchases equal $4,500, and taxes equal $8,000. What are private saving, public saving, and national saving?

Accepted Answer

A)  $3,500, $11,000, and $14,500, respectively
B)  $19,000, $27,000, and $12,500, respectively
C)  $11,000, $3,500, and $14,500, respectively
D)  $27,000, $19,000, and $12,500, respectivelyE) A) and B)
F) C) and D)

Question 3

Consider a closed economy. What remains after paying for consumption and government purchases is

Accepted Answer

A)  national disposable income.
B)  national saving.
C)  public saving.
D)  private saving.E) A) and B)
F) All of the above

Question 4

National saving is

Accepted Answer

A)  the total income in the economy that remains after paying for consumption.
B)  the total income in the economy that remains after paying for consumption and government purchases.
C)  always greater than investment for a closed economy.
D)  equal to private saving minus public saving.E) A) and D)
F) A) and C)

Question 5

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

Question 6

Other things the same, as the maturity of a bond becomes longer, the bond will pay

Accepted Answer

A)  a lower interest rate because it has less risk.
B)  a lower interest rate because it has more risk.
C)  a higher interest rate because it has more risk.
D)  the same interest rate, because there is no relationship between term and risk.E) All of the above
F) None of the above

Question 7

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 8

Draw and label a graph showing equilibrium in the market for loanable funds.

Accepted Answer

Market for...

Question 9

Table 26-1. The following table presents information about a closed economy whose market for loanable funds is in equilibrium.
​
​
   GDP $8.3 trillion  Consumer Spending $5.1 trillion  Taxes Minus Transfers $1.9 trillion  Government Purchases $0.5 trillion \begin{array} { | l | l | } \hline 	ext { GDP } & \$ 8.3 	ext { trillion } \\hline 	ext { Consumer Spending } & \$ 5.1 	ext { trillion } \\hline 	ext { Taxes Minus Transfers } & \$ 1.9 	ext { trillion } \\hline 	ext { Government Purchases } & \$ 0.5 	ext { trillion } \\hline\end{array} GDP  Consumer Spending  Taxes Minus Transfers  Government Purchases ​$8.3 trillion $5.1 trillion $1.9 trillion $0.5 trillion ​​  ​
-Refer to Table 26-1. The quantity of loanable funds demanded is

Accepted Answer

A)  $2.7 trillion.
B)  $1.3 trillion.
C)  $3.2 trillion.
D)  $6.4 trillion. E) All of the above
F) None of the above

Question 10

Suppose there is a shortage in the market for loanable funds. Is the interest rate above or below its equilibrium level? How do desired saving and desired investment at this interest rate compare?

Accepted Answer

The interest rate is below its...

Question 11

Scenario 26-1. Assume the following information for an imaginary, closed economy.
​
​
   GDP $170,000 Taxes $25,000 Government Purchases $32,000 National Saving $19,000\begin{array} { | l | l | } \hline 	ext { GDP } & \$ 170,000 \\hline 	ext { Taxes } & \$ 25,000 \\hline 	ext { Government Purchases } & \$ 32,000 \\hline 	ext { National Saving } & \$ 19,000 \\hline\end{array} GDP  Taxes  Government Purchases  National Saving ​$170,000$25,000$32,000$19,000​​ 
-Refer to Scenario 26-1. For this economy, investment amounts to

Accepted Answer

A)  $7,000.
B)  $25,000.
C)  $32,000.
D)  $19,000. E) A) and C)
F) B) and D)

Question 12

Taking out a mortgage to buy a condo, buying a mutual fund, and building a new factory are all examples of investment.

Accepted Answer

A) True 
 B)False

Question 13

It is claimed that a secondary advantage of mutual funds is that

Accepted Answer

A)  an investor can avoid investment charges and fees.
B)  they give ordinary people access to loanable funds for investing.
C)  they usually outperform stock market indexes.
D)  they give ordinary people access to the skills of professional money managers.E) None of the above
F) A) and B)

Question 14

The interest rate will _____ and the quantity of loanable funds invested will _____ when the government decreases the budget deficit.

Accepted Answer

The answer of The interest rate will _____ and the...

Question 15

What would happen, all else equal, in the market for loanable funds if the government were to decrease the tax rate on interest income?

Accepted Answer

A)  There would be an increase in the equilibrium quantity of loanable funds.
B)  There would be a reduction in the equilibrium quantity of loanable funds.
C)  There would be no change in the equilibrium quantity of loanable funds.
D)  The change in loanable funds is uncertain.E) A) and B)
F) A) and C)

Question 16

Which government policy raises the interest rate and raises investment spending?

Accepted Answer

An investm...

Question 17

Suppose the government finds a major defect in one of a company's products and demands that the product be taken off the market. We would expect that the

Accepted Answer

A)  supply of existing shares of the stock and the price will both rise.
B)  supply of existing shares of the stock and the price will both fall.
C)  demand for existing shares of the stock and the price will both rise.
D)  demand for existing shares of the stock and the price will both fall.E) C) and D)
F) B) and C)

Question 18

Which of the following statements is correct?

Accepted Answer

A)  A large, well-known corporation such as Proctor and Gamble would generally use financial intermediation to finance expansion of its factories.
B)  On average, index funds outperform managed funds.
C)  Unlike corporate bonds and stocks, checking accounts are a store of value.
D)  Financial intermediaries are institutions through which savers can directly provide funds to borrowers.E) A) and C)
F) All of the above

Question 19

Suppose a closed economy had public saving of −$1 trillion and private saving of $17 trillion. What are national saving and investment for this country?

Accepted Answer

A)  $16 trillion, $16 trillion
B)  $16 trillion, $18 trillion
C)  $18 trillion, $16 trillion
D)  $18 trillion, $18 trillionE) A) and B)
F) A) and C)

Question 20

If at some interest rate desired investment is $400 billion, desired private saving is $600 billion, and the budget deficit is $300 billion, is there a surplus or a shortage in the market for loanable funds? What does this imply would happen to interest rates?

Accepted Answer

There is a...

Exam 26: Saving, Investment, and the Financial System

Suppose a closed economy had public saving of −$1 trillion and private saving of $17 trillion. What are national saving and investment for this country?

Correct Answer
verified

Draw and label a graph showing equilibrium in the market for loanable funds.

Correct Answer
verified
Market for...
View Answer

Other things the same, as the maturity of a bond becomes longer, the bond will pay

Correct Answer
verified

Suppose that in a closed economy GDP is equal to $35,000, consumption equal to $16,000, government purchases equal $4,500, and taxes equal $8,000. What are private saving, public saving, and national saving?

Correct Answer
verified

Consider a closed economy. What remains after paying for consumption and government purchases is

Correct Answer
verified

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

The interest rate will _ and the quantity of loanable funds invested will _ when the government decreases the budget deficit.

Correct Answer
verified

Which government policy raises the interest rate and raises investment spending?

Correct Answer
verified
An investm...
View Answer

The sale of bonds

Correct Answer
verified

Suppose the government finds a major defect in one of a company's products and demands that the product be taken off the market. We would expect that the

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

If at some interest rate desired investment is $400 billion, desired private saving is $600 billion, and the budget deficit is $300 billion, is there a surplus or a shortage in the market for loanable funds? What does this imply would happen to interest rates?

Correct Answer
verified
There is a...
View Answer

Suppose there is a shortage in the market for loanable funds. Is the interest rate above or below its equilibrium level? How do desired saving and desired investment at this interest rate compare?

Correct Answer
verified
The interest rate is below its...
View Answer

What would happen, all else equal, in the market for loanable funds if the government were to decrease the tax rate on interest income?

Correct Answer
verified

Taking out a mortgage to buy a condo, buying a mutual fund, and building a new factory are all examples of investment.

Correct Answer
verified

The economy's two most important financial markets are

Correct Answer
verified

Which of the following statements is correct?

Correct Answer
verified

National saving is

Correct Answer
verified

It is claimed that a secondary advantage of mutual funds is that

Correct Answer
verified

Exam 26: Saving, Investment, and the Financial System

Suppose a closed economy had public saving of −$1 trillion and private saving of $17 trillion. What are national saving and investment for this country?

Correct AnswerverifiedShow Answer

Draw and label a graph showing equilibrium in the market for loanable funds.

Correct AnswerverifiedMarket for...View AnswerShow Answer

Other things the same, as the maturity of a bond becomes longer, the bond will pay

Correct AnswerverifiedShow Answer

Suppose that in a closed economy GDP is equal to $35,000, consumption equal to $16,000, government purchases equal $4,500, and taxes equal $8,000. What are private saving, public saving, and national saving?

Correct AnswerverifiedShow Answer

Consider a closed economy. What remains after paying for consumption and government purchases is

Correct AnswerverifiedShow Answer

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

The interest rate will _____ and the quantity of loanable funds invested will _____ when the government decreases the budget deficit.

Correct AnswerverifiedShow Answer

Which government policy raises the interest rate and raises investment spending?

Correct AnswerverifiedAn investm...View AnswerShow Answer

The sale of bonds

Correct AnswerverifiedShow Answer

Suppose the government finds a major defect in one of a company's products and demands that the product be taken off the market. We would expect that the

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If at some interest rate desired investment is $400 billion, desired private saving is $600 billion, and the budget deficit is $300 billion, is there a surplus or a shortage in the market for loanable funds? What does this imply would happen to interest rates?

Correct AnswerverifiedThere is a...View AnswerShow Answer

Suppose there is a shortage in the market for loanable funds. Is the interest rate above or below its equilibrium level? How do desired saving and desired investment at this interest rate compare?

Correct AnswerverifiedThe interest rate is below its...View AnswerShow Answer

What would happen, all else equal, in the market for loanable funds if the government were to decrease the tax rate on interest income?

Correct AnswerverifiedShow Answer

Taking out a mortgage to buy a condo, buying a mutual fund, and building a new factory are all examples of investment.

Correct AnswerverifiedShow Answer

The economy's two most important financial markets are

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

National saving is

Correct AnswerverifiedShow Answer

It is claimed that a secondary advantage of mutual funds is that

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Market for...
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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Private saving is $550 billion...
View Answer

The interest rate will _ and the quantity of loanable funds invested will _ when the government decreases the budget deficit.

Correct Answer
verified

Correct Answer
verified
An investm...
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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There is a...
View Answer

Correct Answer
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The interest rate is below its...
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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