Question 1

Which of the following statements is correct?

Accepted Answer

A)  The interest rate that is usually reported is the interest rate that has been corrected for inflation.
B)  The supply of, and demand for, loanable funds depend on the real (rather than nominal)  interest rate.
C)  If the nominal interest rate has decreased and the real interest rate has also decreased, then the inflation rate must have decreased as well.
D)  All of the above are correct.E) A) and B)
F) A) and C)

Question 2

Two bonds have the same term to maturity. The first was issued by a state government and the probability of default is believed to be low. The other was issued by a corporation and the probability of default is believed to be high. Which of the following is correct?

Accepted Answer

A)  Because they have the same term to maturity the interest rates should be the same.
B)  Because of the differences in tax treatment and credit risk, the state bond should have the higher interest rate.
C)  Because of the differences in tax treatment and credit risk, the corporate bond should have the higher interest rate.
D)  It is not possible to say if one bond has a higher interest rate than the other.E) B) and D)
F) B) and C)

Question 3

Figure 26-4. On the horizontal axis of the graph, L represents the quantity of loanable funds in billions of dollars. 
-Refer to Figure 26-4. If the equilibrium quantity of loanable funds is $50 billion and if the equilibrium nominal interest rate is 8 percent, then

Accepted Answer

A)  there is an excess supply of loanable funds at a real interest rate of 6 percent.
B)  there is an excess demand for loanable funds at a real interest rate of 8 percent.
C)  the rate of inflation is approximately 2 percent.
D)  the rate of inflation is approximately 14 percent.E) A) and C)
F) All of the above

Question 4

A national chain of grocery stores wants to finance the construction of several new stores. The firm has limited internal funds, so it likely will

Accepted Answer

A)  demand the required funds by buying bonds.
B)  demand the required funds by selling bonds.
C)  supply the required funds by buying bonds.
D)  supply the required funds by selling bonds.E) None of the above
F) B) and D)

Question 5

Which of the following is NOT correct?

Accepted Answer

A)  Many economist oppose increases in how much people save.
B)  Saving is an important long-run determinant of a nation's standard of living.
C)  A change in tax laws that encouraged greater saving would lower interest rates.
D)  Taxes on interest income can substantially decrease the future value of current saving.E) A) and C)
F) A) and B)

Question 6

Which of the following lists correctly identifies the four expenditure categories of GDP?

Accepted Answer

A)  consumption, government purchases, investment, net-exports
B)  consumption, investment, depreciation, net-exports
C)  consumption, saving, investment, depreciation,
D)  consumption, government purchases, investment, savingsE) B) and C)
F) None of the above

Question 7

Robert buys bonds. Rachel buys a new truck for her landscaping business. Identify both as savers, investors, both, or neither.

Accepted Answer

Robert is ...

Question 8

The length of time until a bond matures is called the

Accepted Answer

A)  perpetuity.
B)  term.
C)  maturity.
D)  intermediation.E) All of the above
F) C) and D)

Question 9

From 2009 to 2012, the federal government's budget deficit was about

Accepted Answer

A)  5 percent of GDP, and this led to the highest debt-GDP ratio in U.S history.
B)  10 percent of GDP, and this led to the highest debt-GDP ratio in U.S history.
C)  5 percent of GDP, and this led to the highest debt-GDP ratio since World War II.
D)  9 percent of GDP, and this led to the highest debt-GDP ratio since World War II.E) A) and C)
F) A) and B)

Question 10

In macroeconomics, _____ refers to the purchase of new capital.

Accepted Answer

The answer of In macroeconomics, _____ refers to the purchase...

Question 11

Which of the following is a certificate of indebtedness?

Accepted Answer

A)  both stocks and bonds
B)  stocks but not bonds
C)  bonds but not stocks
D)  neither stocks nor bondsE) A) and B)
F) A) and C)

Question 12

All or part of a firm's profits may be paid out to the firm's stockholders in the form of

Accepted Answer

A)  retained earnings.
B)  dividends.
C)  interest payments.
D)  capital accounts.E) None of the above
F) A) and D)

Question 13

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) A) and D)
F) A) and C)

Question 14

Which of the following could explain an increase in the interest rate and 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) B) and D)
F) C) and D)

Question 15

Net exports must equal zero for any economy

Accepted Answer

A)  that is closed.
B)  for which Y = C + I + G.
C)  for which S = Y - C - G.
D)  All of the above are correct.E) B) and C)
F) None of the above

Question 16

What variable adjusts to balance demand and supply in the market for loanable funds?

Accepted Answer

The real i...

Question 17

Which of the following would not be a result of replacing the income tax with a consumption tax so that interest income was no longer taxed?

Accepted Answer

A)  The interest rate would decrease.
B)  Investment would decrease.
C)  The standard of living would eventually rise.
D)  The supply of loanable funds would shift right.E) A) and C)
F) C) and D)

Question 18

The term loanable funds refers to all income that is not used for consumption.

Accepted Answer

A) True 
 B)False

Question 19

What is the main function of the financial system?

Accepted Answer

Matching s...

Question 20

_____ and _____ are the two most important financial intermediaries.

Accepted Answer

Banks, Mut...

Exam 26: Saving, Investment, and the Financial System

A national chain of grocery stores wants to finance the construction of several new stores. The firm has limited internal funds, so it likely will

Correct AnswerverifiedShow Answer

Figure 26-4. On the horizontal axis of the graph, L represents the quantity of loanable funds in billions of dollars. -Refer to Figure 26-4. If the equilibrium quantity of loanable funds is $50 billion and if the equilibrium nominal interest rate is 8 percent, then

Correct AnswerverifiedShow Answer

The length of time until a bond matures is called the

Correct AnswerverifiedShow Answer

What is the main function of the financial system?

Correct AnswerverifiedMatching s...View AnswerShow Answer

Two bonds have the same term to maturity. The first was issued by a state government and the probability of default is believed to be low. The other was issued by a corporation and the probability of default is believed to be high. Which of the following is correct?

Correct AnswerverifiedShow Answer

What variable adjusts to balance demand and supply in the market for loanable funds?

Correct AnswerverifiedThe real i...View AnswerShow Answer

Which of the following statements is correct?

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All or part of a firm's profits may be paid out to the firm's stockholders in the form of

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

In macroeconomics, _____ refers to the purchase of new capital.

Correct AnswerverifiedShow Answer

Net exports must equal zero for any economy

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From 2009 to 2012, the federal government's budget deficit was about

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Which of the following is a certificate of indebtedness?

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Which of the following would not be a result of replacing the income tax with a consumption tax so that interest income was no longer taxed?

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The term loanable funds refers to all income that is not used for consumption.

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Which of the following lists correctly identifies the four expenditure categories of GDP?

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Robert buys bonds. Rachel buys a new truck for her landscaping business. Identify both as savers, investors, both, or neither.

Correct AnswerverifiedRobert is ...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

_____ and _____ are the two most important financial intermediaries.

Correct AnswerverifiedBanks, Mut...View AnswerShow Answer

Which of the following is NOT correct?

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Matching s...
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The real i...
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Robert is ...
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_ and _ are the two most important financial intermediaries.

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Banks, Mut...
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Correct Answer
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