Question 1

Suppose a country repealed its investment tax credit. The effects of this are represented by shifting the

Accepted Answer

A)  demand for and the supply of loanable funds to the right.
B)  demand for and the supply of loanable funds to the left.
C)  supply of loanable funds to the right and the demand for loanable funds to the left.
D)  None of the above is correct.E) All of the above
F) None of the above

Question 2

Which of the following numbers is not associated with shares of a company's stock?

Accepted Answer

A)  term
B)  dividend
C)  price
D)  price-earnings ratioE) All of the above
F) None of the above

Question 3

Alberta buys a paint sprayer and a lift for her car customizing shop. A macroeconomist would refer to these purchases as investment.

Accepted Answer

A) True 
 B)False

Question 4

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

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

A budget surplus

Accepted Answer

A)  occurs when the government has debt equal to zero.
B)  causes government debt to increase.
C)  exists when government spending is greater than tax revenues.
D)  reduces the government's debt.E) A) and C)
F) A) and B)

Question 7

If in the past Congress had taken additional actions to make saving more rewarding, then today it is likely that the equilibrium interest rate

Accepted Answer

A)  and the equilibrium quantity of loanable funds both would be lower.
B)  and the equilibrium quantity of loanable funds both would be higher.
C)  would be higher and the equilibrium quantity of loanable funds would be lower.
D)  would be lower and the equilibrium quantity of loanable funds would be higher.E) B) and C)
F) A) and B)

Question 8

A decrease 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 if private saving doesn't change.E) A) and B)
F) B) and C)

Question 9

Suppose that you are a broker and people tell you the following about themselves. What sort of bond would you recommend to each? Defend your choices.
a."I am in a high federal income tax bracket and I don't want to take very much risk."
b."I want a high return and I am willing to take a lot of risk to get it."
c."I want a decent return and I have enough deductions that I don't value tax breaks highly."

Accepted Answer

a.A municipal bond. Municipal bonds gene...

Question 10

Figure 26-3. The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves. 1 to D2 is called A) an increase in the demand for loanable funds, and that increase would originate from people who had some extra income they wanted to lend. B) an increase in the demand for loanable funds, and that increase would originate from households and firms who wish to borrow to make investments. C) a decrease in the demand for loanable funds, and that decrease would originate from people who had some extra income they wanted to lend. D) a decrease in the demand for loanable funds, and that decrease would originate from households and firms who wish to borrow to make investments." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 26-3. A shift of the demand curve from D1 to D2 is called

Accepted Answer

A)  an increase in the demand for loanable funds, and that increase would originate from people who had some extra income they wanted to lend.
B)  an increase in the demand for loanable funds, and that increase would originate from households and firms who wish to borrow to make investments.
C)  a decrease in the demand for loanable funds, and that decrease would originate from people who had some extra income they wanted to lend.
D)  a decrease in the demand for loanable funds, and that decrease would originate from households and firms who wish to borrow to make investments.E) C) and D)
F) B) and D)

Question 11

What would happen in the market for loanable funds if the government were to increase the tax on interest income?

Accepted Answer

A)  The supply of loanable funds would shift right.
B)  The demand for loanable funds would shift right.
C)  The supply of loanable funds would shift left.
D)  The demand for loanable funds would shift left.E) All of the above
F) A) and B)

Question 12

The financial system is important because it helps to match one person's _____ with another person's _____.

Accepted Answer

The answer of The financial system is important because it...

Question 13

Table 26-3. The following table presents information about a closed economy whose market for loanable funds is in equilibrium. 
-Refer to Table 26-3. Determine the quantity of private saving.

Accepted Answer

A)  $0.2 trillion
B)  $1.6 trillion
C)  $1.8 trillion
D)  $2.6 trillionE) B) and D)
F) B) and C)

Question 14

If the quantity of loanable funds demanded exceeds the quantity of loanable funds supplied,

Accepted Answer

A)  there is a surplus and the interest rate is above the equilibrium level.
B)  there is a surplus and the interest rate is below the equilibrium level.
C)  there is a shortage and the interest rate is above the equilibrium level.
D)  there is a shortage and the interest rate is below the equilibrium level.E) B) and D)
F) All of the above

Question 15

Which of the following would likely make the interest rate on a bond higher than otherwise?

Accepted Answer

A)  both high credit risk and a long term
B)  high credit risk but not a long term
C)  a long term but not a high credit risk
D)  neither high credit risk nor a long termE) None of the above
F) A) and B)

Question 16

Camp Company had total earnings of $600 million in 2013, out of which it retained 20 percent for future investments. In 2013, its stock featured a dividend yield of 4 percent and 100 million shares were outstanding. The price-earnings ratio for Camp Company stock was

Accepted Answer

A)  5.
B)  150.
C)  20.
D)  25.E) All of the above
F) A) and B)

Question 17

The fictional country of Alpetra increases the income tax rate so that tax revenues increase by $50 million. If GDP, consumption, and government spending remains the same and Alpetra is a closed economy, what is the change in investment?

Accepted Answer

A)  $50 million
B)  $100 million
C)  No change
D)  Cannot be determined from the information givenE) C) and D)
F) None of the above

Question 18

A higher interest rate makes _____ less attractive. Therefore the quantity of loanable funds demanded decreases.

Accepted Answer

The answer of A higher interest rate makes _____ less...

Question 19

Long-term bonds are

Accepted Answer

A)  riskier than short-term bonds, and so interest rates on long-term bonds are usually lower than interest rates on short-term bonds.
B)  riskier than short-term bonds, and so interest rates on long-term bonds are usually higher than interest rates on short-term bonds.
C)  less risky than short-term bonds, and so interest rates on long-term bonds are usually lower than interest rates on short-term bonds.
D)  less risky than short-term bonds, and so interest rates on long-term bonds are usually higher than interest rates on short-term bonds.E) None of the above
F) C) and D)

Question 20

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.

Accepted Answer

A) True 
 B)False

Exam 26: Saving, Investment, and the Financial System

Long-term bonds are

Correct Answer
verified

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.

Correct Answer
verified

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

Correct Answer
verified

Which of the following statements is correct?

Correct Answer
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The financial system is important because it helps to match one person's _ with another person's _.

Correct Answer
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Figure 26-3. The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves. -Refer to Figure 26-3. A shift of the demand curve from D₁ to D₂ is called

Correct Answer
verified

Correct Answer
verified
a.A municipal bond. Municipal bonds gene...
View Answer

Camp Company had total earnings of $600 million in 2013, out of which it retained 20 percent for future investments. In 2013, its stock featured a dividend yield of 4 percent and 100 million shares were outstanding. The price-earnings ratio for Camp Company stock was

Correct Answer
verified

If the quantity of loanable funds demanded exceeds the quantity of loanable funds supplied,

Correct Answer
verified

A budget surplus

Correct Answer
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A higher interest rate makes _____ less attractive. Therefore the quantity of loanable funds demanded decreases.

Correct Answer
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Alberta buys a paint sprayer and a lift for her car customizing shop. A macroeconomist would refer to these purchases as investment.

Correct Answer
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Table 26-3. The following table presents information about a closed economy whose market for loanable funds is in equilibrium. -Refer to Table 26-3. Determine the quantity of private saving.

Correct Answer
verified

If in the past Congress had taken additional actions to make saving more rewarding, then today it is likely that the equilibrium interest rate

Correct Answer
verified

Which of the following would likely make the interest rate on a bond higher than otherwise?

Correct Answer
verified

What would happen in the market for loanable funds if the government were to increase the tax on interest income?

Correct Answer
verified

The fictional country of Alpetra increases the income tax rate so that tax revenues increase by $50 million. If GDP, consumption, and government spending remains the same and Alpetra is a closed economy, what is the change in investment?

Correct Answer
verified

A decrease in the budget deficit

Correct Answer
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Which of the following numbers is not associated with shares of a company's stock?

Correct Answer
verified

Suppose a country repealed its investment tax credit. The effects of this are represented by shifting the

Correct Answer
verified

Exam 26: Saving, Investment, and the Financial System

Long-term bonds are

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

The financial system is important because it helps to match one person's _____ with another person's _____.

Correct AnswerverifiedShow Answer

Figure 26-3. The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves. -Refer to Figure 26-3. A shift of the demand curve from D1 to D2 is called

Correct AnswerverifiedShow Answer

Correct Answerverifieda.A municipal bond. Municipal bonds gene...View AnswerShow Answer

Camp Company had total earnings of $600 million in 2013, out of which it retained 20 percent for future investments. In 2013, its stock featured a dividend yield of 4 percent and 100 million shares were outstanding. The price-earnings ratio for Camp Company stock was

Correct AnswerverifiedShow Answer

If the quantity of loanable funds demanded exceeds the quantity of loanable funds supplied,

Correct AnswerverifiedShow Answer

A budget surplus

Correct AnswerverifiedShow Answer

A higher interest rate makes _____ less attractive. Therefore the quantity of loanable funds demanded decreases.

Correct AnswerverifiedShow Answer

Alberta buys a paint sprayer and a lift for her car customizing shop. A macroeconomist would refer to these purchases as investment.

Correct AnswerverifiedShow Answer

Table 26-3. The following table presents information about a closed economy whose market for loanable funds is in equilibrium. -Refer to Table 26-3. Determine the quantity of private saving.

Correct AnswerverifiedShow Answer

If in the past Congress had taken additional actions to make saving more rewarding, then today it is likely that the equilibrium interest rate

Correct AnswerverifiedShow Answer

Which of the following would likely make the interest rate on a bond higher than otherwise?

Correct AnswerverifiedShow Answer

What would happen in the market for loanable funds if the government were to increase the tax on interest income?

Correct AnswerverifiedShow Answer

The fictional country of Alpetra increases the income tax rate so that tax revenues increase by $50 million. If GDP, consumption, and government spending remains the same and Alpetra is a closed economy, what is the change in investment?

Correct AnswerverifiedShow Answer

A decrease in the budget deficit

Correct AnswerverifiedShow Answer

Which of the following numbers is not associated with shares of a company's stock?

Correct AnswerverifiedShow Answer

Suppose a country repealed its investment tax credit. The effects of this are represented by shifting the

Correct AnswerverifiedShow Answer

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The financial system is important because it helps to match one person's _ with another person's _.

Correct Answer
verified

Figure 26-3. The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves. -Refer to Figure 26-3. A shift of the demand curve from D₁ to D₂ is called

Correct Answer
verified

Correct Answer
verified
a.A municipal bond. Municipal bonds gene...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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