Question 1

Stock represents

Accepted Answer

A)   a claim to a share of the profits of a firm.
B)   ownership in a firm.
C)   equity finance.
D)   All of the above are correctE) C) and D)
F) A) and D)

Question 2

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,indexed 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) C) and D)
F) A) and B)

Question 3

Suppose a closed economy had public saving of $2 trillion and private saving of $4 trillion.What are national saving and investment for this country?

Accepted Answer

A)   $6 trillion,$6 trillion
B)   $6 trillion,$2 trillion
C)   $1 trillion,$4 trillion
D)   $2 trillion,$2 trillionE) B) and D)
F) A) and B)

Question 4

In a closed economy,investment must be equal to private saving.

Accepted Answer

A) True 
 B)False

Question 5

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) None of the above
F) B) and D)

Question 6

Which of the following is a financial-market transaction?

Accepted Answer

A)   A saver buys shares in a mutual fund.
B)   A saver deposits money into a credit union.
C)   A saver buys a bond a corporation has just issued so it can purchase capital.
D)   None of the above is correct.E) B) and C)
F) All of the above

Question 7

Suppose Sarah Lee Corporation stock has a P/E ratio of 8.This P/E ratio is relatively

Accepted Answer

A)   low,indicating that buyers may expect earnings to rise.
B)   low,indicating that buyers may expect earnings to fall.
C)   high,indicating that buyers may expect earnings to rise.
D)   high,indicating that buyers may expect earnings to fall.E) B) and D)
F) C) and D)

Question 8

For an economy that engages in international trade,GDP is divided into four components.Which of the following items is not one of those components?

Accepted Answer

A)   consumption
B)   taxes
C)   government purchases
D)   net exportsE) None of the above
F) B) and C)

Question 9

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

Question 10

Figure 13-4.On the horizontal axis of the graph,L represents the quantity of loanable funds in billions of dollars. 
-Refer to Figure 13-4.If the equilibrium quantity of loanable funds is $56 billion and if the rate of inflation is 4 percent,then the equilibrium real interest rate is

Accepted Answer

A)   lower than 6 percent..
B)   6 percent.
C)   between 6 percent and 8 percent.
D)   higher than 8 percent.E) A) and D)
F) C) and D)

Question 11

Other things the same,an increase in government expenditures with no change in taxes makes national saving

Accepted Answer

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

Question 12

Table 13-1
 
-Refer to Table 13-1.What was Hershey's earnings per share?

Accepted Answer

A)   $38
B)   $1.64
C)   $1.31
D)   $0.61E) A) and C)
F) None of the above

Question 13

An increase in the budget deficit

Accepted Answer

A)   makes investment spending fall.
B)   makes investment spending rise.
C)   does not affect investment spending.
D)   may increase,decrease,or not affect investment spending.E) All of the above
F) A) and C)

Question 14

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 15

If consumers reduced their spending,what would happen to the interest rate and investment?

Accepted Answer

The interest rate wo...

Question 16

Suppose a government that taxed all interest income changed its tax law so that the first $5,000 of a taxpayer's interest income was tax free.This would shift the

Accepted Answer

A)   supply of loanable funds to the right,causing interest rates to fall.
B)   supply of loanable funds to the left,causing interest rates to rise.
C)   demand for loanable funds to the right,causing interest rates to rise.
D)   demand for loanable funds to the left,causing interest rates to fall.E) C) and D)
F) A) and C)

Question 17

Which of the following is both a store of value and a common medium of exchange?

Accepted Answer

A)   corporate bonds
B)   mutual funds
C)   checking account balances
D)   All of the above are correct.E) B) and D)
F) None of the above

Question 18

In a closed economy,private saving is

Accepted Answer

A)   the amount of income that households have left after paying for their taxes and consumption.
B)   the amount of income that businesses have left after paying for the factors of production.
C)   the amount of tax revenue that the government has left after paying for its spending.
D)   always equal to investment.E) A) and B)
F) A) and C)

Question 19

Stock in Creole Cuisine Restaurants is selling at $25 per share.Creole Cuisine had earnings of $5 a share and a dividend yield of 5 percent.The dividend is

Accepted Answer

A)   $0.25 and the price-earnings ratio is 5.
B)   $.25 and the price-earnings ratio is 6.7.
C)   $1.25 and the price-earnings ratio is 5.
D)   $1.25 and the price-earnings ratio is 6.7.E) A) and D)
F) A) and C)

Question 20

In a small closed economy investment is $50 billion and private saving is $55 billion.What are public saving and national saving?

Accepted Answer

A)   $60 billion and $5 billion
B)   $50 billion and -$5 billion
C)   $5 billion and $60 billion
D)   -$5 billion and $50 billionE) B) and C)
F) None of the above

Exam 26: Saving,investment,and the Financial System

For an economy that engages in international trade,GDP is divided into four components.Which of the following items is not one of those components?

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An increase in the budget deficit

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If consumers reduced their spending,what would happen to the interest rate and investment?

Correct AnswerverifiedThe interest rate wo...View AnswerShow Answer

Table 13-1 -Refer to Table 13-1.What was Hershey's earnings per share?

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Index funds

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In a closed economy,private saving is

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Stock represents

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In a small closed economy investment is $50 billion and private saving is $55 billion.What are public saving and national saving?

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Which of the following is a financial-market transaction?

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Suppose a closed economy had public saving of $2 trillion and private saving of $4 trillion.What are national saving and investment for this country?

Correct AnswerverifiedShow Answer

Suppose Sarah Lee Corporation stock has a P/E ratio of 8.This P/E ratio is relatively

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

Suppose a government that taxed all interest income changed its tax law so that the first $5,000 of a taxpayer's interest income was tax free.This would shift the

Correct AnswerverifiedShow Answer

In a closed economy,investment must be equal to private saving.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Figure 13-4.On the horizontal axis of the graph,L represents the quantity of loanable funds in billions of dollars. -Refer to Figure 13-4.If the equilibrium quantity of loanable funds is $56 billion and if the rate of inflation is 4 percent,then the equilibrium real interest rate is

Correct AnswerverifiedShow Answer

Which of the following is both a store of value and a common medium of exchange?

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Which of the following statements is correct?

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Stock in Creole Cuisine Restaurants is selling at $25 per share.Creole Cuisine had earnings of $5 a share and a dividend yield of 5 percent.The dividend is

Correct AnswerverifiedShow Answer

Other things the same,an increase in government expenditures with no change in taxes makes national saving

Correct AnswerverifiedShow Answer

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The interest rate wo...
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