Question 1

Which of the following involves financial intermediation?

Accepted Answer

A)  a bank makes a loan
B)  a household buys stock issued by a corporation
C)  a foreign government purchases U.S. government bonds
D)  All of the above are correct.E) B) and D)
F) B) and C)

Question 2

If the supply of loanable funds shifts to the right, then the equilibrium interest rate

Accepted Answer

A)  and quantity of loanable funds rises.
B)  and quantity of loanable funds falls.
C)  rises and the quantity of loanable funds falls.
D)  falls and the quantity of loanable funds rises.E) B) and D)
F) B) and C)

Question 3

A decrease in government spending and the enactment of an investment tax credit would definitely cause

Accepted Answer

A)  the quantity of loanable funds traded to increase.
B)  the interest rate to increase.
C)  the quantity of loanable funds traded to decrease.
D)  the interest rate to decrease.E) A) and C)
F) All of the above

Question 4

Which of the following is an example of financial intermediation?

Accepted Answer

A)  John buys shares of stock issued by a fast food company.
B)  A foreign government buys bonds issued by the U.S. Treasury.
C)  Susan makes a deposit at a bank and the bank uses this money to make an auto loan to Ferguson.
D)  None of the above is correct.E) A) and B)
F) B) and C)

Question 5

When the government budget deficit rises, national saving is reduced, interest rates rise, and investment falls.

Accepted Answer

A) True 
 B)False

Question 6

If federal tax rates increased, what would happen to the interest rate on municipal bonds?

Accepted Answer

the intere...

Question 7

Skyline Chili wants to finance the purchase of new equipment for its restaurants. The firm has limited internal funds, so Skyline likely will

Accepted Answer

A)  demand funds from the financial system by buying bonds.
B)  demand funds from the financial system by selling bonds.
C)  supply funds to the financial system by buying bonds.
D)  supply funds to the financial system by selling bonds.E) All of the above
F) None of the above

Question 8

If the supply for loanable funds shifts to the left, then the equilibrium interest rate

Accepted Answer

A)  and quantity of loanable funds rises.
B)  and quantity of loanable funds falls.
C)  rises and the quantity of loanable funds falls.
D)  falls and the quantity of loanable funds rises.E) A) and D)
F) A) and C)

Question 9

Suppose the economy is closed with national saving of $3 trillion, consumption of $10 trillion, and government purchases of $4 trillion. What is GDP?

Accepted Answer

A)  $3 trillion
B)  $9 trillion
C)  $11 trillion
D)  $17 trillionE) All of the above
F) None of the above

Question 10

The Dow Jones Industrial Average is now based on the prices of the stocks of

Accepted Answer

A)  30 major U.S. corporations.
B)  100 major U.S. corporations.
C)  500 representative U.S. corporations.
D)  1,000 representative U.S. corporations.E) All of the above
F) C) and D)

Question 11

A stock index is

Accepted Answer

A)  an average of a group of stock prices.
B)  an average of a group of stock yields.
C)  a measure of the risk relative to the profitability of corporations.
D)  a report in a newspaper or other media outlet on the price of the stock and earnings of the corporation that issued the stock.E) B) and C)
F) A) and C)

Question 12

A policy that induces people to save more shifts

Accepted Answer

A)  the supply of loanable funds and raises interest rates.
B)  the supply of loanable funds and reduces interest rates.
C)  the demand for loanable funds and raises interest rates.
D)  the demand for loanable funds and reduces interest rates.E) C) and D)
F) A) and B)

Question 13

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 public and national saving?

Accepted Answer

A)  public and national saving would rise
B)  public and national saving would fall
C)  public saving would rise and national saving would fall
D)  public saving would fall and national saving would riseE) B) and C)
F) None of the above

Question 14

Concerns about the bankruptcy of an appliance manufacturer diminish after a new CEO is appointed and some of the company's less productive factories are sold. What type of risk for bondholders falls? What happens to the interest rate on this company's bonds?

Accepted Answer

default ri...

Question 15

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

Question 16

The bond market, the stock market, banks, pension funds, and insurance companies are all financial

Accepted Answer

A)  systems.
B)  markets.
C)  institutions.
D)  intermediaries.E) None of the above
F) B) and C)

Question 17

The income that households have left after paying their taxes and paying for their consumption is known as _____.

Accepted Answer

The answer of The income that households have left after...

Question 18

Nastech Pharmaceuticals announced it has developed a nasal spray that would reduce hunger cravings. Other things the same we would expect

Accepted Answer

A)  the demand for existing shares of stock in this company to decrease, so the price would fall.
B)  the demand for existing shares of stock in this company to increase, so the price would rise.
C)  the supply of existing shares of stock in this company to decrease, so the price would fall.
D)  the supply of existing shares of stock in this company to increase, so the price would rise.E) A) and B)
F) C) and D)

Question 19

Stock in Frozen Dreams, an ice cream manufacturer, has a price to earnings ratio of 24. Is this comparatively high or low? What are two explanations for the size of this company's price to earnings ratio?

Accepted Answer

Its price to earnings ratio is...

Question 20

Public saving is the difference between _____ and _____.

Accepted Answer

tax revenue, governm...

Exam 26: Saving, Investment, and the Financial System

The income that households have left after paying their taxes and paying for their consumption is known as _____.

Correct AnswerverifiedShow Answer

When the government budget deficit rises, national saving is reduced, interest rates rise, and investment falls.

Correct AnswerverifiedShow Answer

A policy that induces people to save more shifts

Correct AnswerverifiedShow Answer

Which of the following involves financial intermediation?

Correct AnswerverifiedShow Answer

A decrease in government spending and the enactment of an investment tax credit would definitely cause

Correct AnswerverifiedShow Answer

Which of the following is an example of financial intermediation?

Correct AnswerverifiedShow Answer

Stock in Frozen Dreams, an ice cream manufacturer, has a price to earnings ratio of 24. Is this comparatively high or low? What are two explanations for the size of this company's price to earnings ratio?

Correct AnswerverifiedIts price to earnings ratio is...View AnswerShow Answer

Skyline Chili wants to finance the purchase of new equipment for its restaurants. The firm has limited internal funds, so Skyline likely will

Correct AnswerverifiedShow Answer

The Dow Jones Industrial Average is now based on the prices of the stocks of

Correct AnswerverifiedShow Answer

The bond market, the stock market, banks, pension funds, and insurance companies are all financial

Correct AnswerverifiedShow Answer

Suppose the economy is closed with national saving of $3 trillion, consumption of $10 trillion, and government purchases of $4 trillion. What is GDP?

Correct AnswerverifiedShow Answer

If the supply for loanable funds shifts to the left, then the equilibrium interest rate

Correct AnswerverifiedShow Answer

Nastech Pharmaceuticals announced it has developed a nasal spray that would reduce hunger cravings. Other things the same we would expect

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 public and national saving?

Correct AnswerverifiedShow Answer

Public saving is the difference between _____ and _____.

Correct Answerverifiedtax revenue, governm...View AnswerShow Answer

Concerns about the bankruptcy of an appliance manufacturer diminish after a new CEO is appointed and some of the company's less productive factories are sold. What type of risk for bondholders falls? What happens to the interest rate on this company's bonds?

Correct Answerverifieddefault ri...View AnswerShow Answer

A stock index is

Correct AnswerverifiedShow Answer

If federal tax rates increased, what would happen to the interest rate on municipal bonds?

Correct Answerverifiedthe intere...View AnswerShow Answer

If the supply of loanable funds shifts to the right, then the equilibrium interest rate

Correct AnswerverifiedShow Answer

If a firm wants to borrow it can

Correct AnswerverifiedShow Answer

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Its price to earnings ratio is...
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Public saving is the difference between _ and _.

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tax revenue, governm...
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the intere...
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