Question 1

National saving is the sum of _____ and _____. In a closed economy it is equal to _____ in equilibrium.

Accepted Answer

private saving, publ...

Question 2

Suppose the U.S. offered a tax credit for firms that built new factories in the U.S. Then the

Accepted Answer

A)  demand for loanable funds would shift rightward, initially creating a surplus of loanable funds at the original interest rate.
B)  demand for loanable funds would shift rightward, initially creating a shortage of loanable funds at the original interest rate.
C)  supply of loanable funds would shift rightward, initially creating a surplus of loanable funds at the original interest rate.
D)  supply of loanable funds would shift rightward, initially creating a shortage of loanable funds at the original interest rate.E) A) and D)
F) A) and B)

Question 3

When the government increases spending (holding taxes constant), the budget balance _____. This causes the interest rate in the market for loanable funds to _____ and investment to _____.

Accepted Answer

falls, inc...

Question 4

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 D)
F) B) and C)

Question 5

Suppose the government changed the tax laws, with the result that people were encouraged to consume more and save less. Using the loanable funds model, a consequence would be

Accepted Answer

A)  lower interest rates and lower investment.
B)  lower interest rates and greater investment.
C)  higher interest rates and lower investment.
D)  higher interest rates and higher investment.E) None of the above
F) A) and B)

Question 6

An increase in the budget deficit shifts the demand for loanable funds to the right.

Accepted Answer

A) True 
 B)False

Question 7

A bond buyer is a

Accepted Answer

A)  saver.Bond buyers must hold their bonds until maturity.
B)  saver.Bond buyers may sell their bonds prior to maturity.
C)  borrower.Bond buyers must hold their bonds until maturity.
D)  borrower.Bond buyers may sell their bonds prior to maturity.E) B) and C)
F) A) and B)

Question 8

Consider a closed economy. In which of the following cases national saving must equal private saving?

Accepted Answer

A)  Private saving is equal to government expenditures.
B)  Public saving is equal to investment.
C)  After paying their taxes and paying for their consumption, households have nothing left.
D)  The government's tax revenue is equal to its expenditures.E) B) and C)
F) A) and C)

Question 9

If the government budget deficit increases, which curve in the market for loanable funds shifts, which direction does it shift, and what happens to the interest rate?

Accepted Answer

The supply of loanab...

Question 10

When the government increases its borrowing, the budget _____ increases and government debt _____. The resulting change in investment due to this increased government borrowing is called _____.

Accepted Answer

deficit, i...

Question 11

If a share of stock in Dell sells for $70, the retained earnings per share are $5, and the dividend per share is $2, then the price-earnings ratio is 10.

Accepted Answer

A) True 
 B)False

Question 12

Crowding out occurs when investment declines because a budget

Accepted Answer

A)  deficit makes interest rates rise.
B)  deficit makes interest rates fall.
C)  surplus makes interest rates rise.
D)  surplus makes interest rates fall.E) B) and D)
F) B) and C)

Question 13

If the government's expenditures exceeded its receipts, it would likely

Accepted Answer

A)  lend money to a bank or other financial intermediary.
B)  borrow money from a bank or other financial intermediary.
C)  buy bonds directly from the public.
D)  sell bonds directly to the public.E) None of the above
F) A) and D)

Question 14

Bonds issued by state and local governments are called _____ bonds. Bonds issued by financially shaky corporations are called _____ bonds. Of these two, which type of bond usually pays a relatively higher interest rate?

Accepted Answer

municipal,...

Question 15

Northwest Wholesale Foods sells common stock. The company is using

Accepted Answer

A)  equity financing and the return shareholders earn is fixed.
B)  equity financing and the return shareholders earn depends on how profitable the company is.
C)  debt financing and the return shareholders earn is fixed.
D)  debt financing and the return shareholders earn depends on how profitable the company is.E) A) and B)
F) B) and C)

Question 16

A budget deficit

Accepted Answer

A)  changes the supply of loanable funds.
B)  changes the demand for loanable funds.
C)  changes both the supply of and demand for loanable funds.
D)  does not influence the supply of or the demand for loanable funds.E) None of the above
F) C) and D)

Question 17

Congress and the President implement an investment tax credit. Which curve in the market for loanable funds shifts, which direction does it shift, and what happens to the interest rate?

Accepted Answer

The demand for loana...

Question 18

The conventions of national income accounting imply that saving and investment are equal for the economy as a whole and for individual households and firms.

Accepted Answer

A) True 
 B)False

Question 19

List three characteristics of a bond that would make its interest rate higher than otherwise.

Accepted Answer

it has a longer term to maturi...

Question 20

In the terminology of macroeconomics, what's the difference between a saver and an investor?

Accepted Answer

A saver earns more than he spe...

Exam 26: Saving, Investment, and the Financial System

In a closed economy, private saving is

Correct AnswerverifiedShow Answer

If a share of stock in Dell sells for $70, the retained earnings per share are $5, and the dividend per share is $2, then the price-earnings ratio is 10.

Correct AnswerverifiedShow Answer

National saving is the sum of _____ and _____. In a closed economy it is equal to _____ in equilibrium.

Correct Answerverifiedprivate saving, publ...View AnswerShow Answer

In the terminology of macroeconomics, what's the difference between a saver and an investor?

Correct AnswerverifiedA saver earns more than he spe...View AnswerShow Answer

Northwest Wholesale Foods sells common stock. The company is using

Correct AnswerverifiedShow Answer

A bond buyer is a

Correct AnswerverifiedShow Answer

Congress and the President implement an investment tax credit. Which curve in the market for loanable funds shifts, which direction does it shift, and what happens to the interest rate?

Correct AnswerverifiedThe demand for loana...View AnswerShow Answer

A budget deficit

Correct AnswerverifiedShow Answer

When the government increases spending (holding taxes constant), the budget balance _____. This causes the interest rate in the market for loanable funds to _____ and investment to _____.

Correct Answerverifiedfalls, inc...View AnswerShow Answer

Suppose the government changed the tax laws, with the result that people were encouraged to consume more and save less. Using the loanable funds model, a consequence would be

Correct AnswerverifiedShow Answer

The conventions of national income accounting imply that saving and investment are equal for the economy as a whole and for individual households and firms.

Correct AnswerverifiedShow Answer

Bonds issued by state and local governments are called _____ bonds. Bonds issued by financially shaky corporations are called _____ bonds. Of these two, which type of bond usually pays a relatively higher interest rate?

Correct Answerverifiedmunicipal,...View AnswerShow Answer

When the government increases its borrowing, the budget _____ increases and government debt _____. The resulting change in investment due to this increased government borrowing is called _____.

Correct Answerverifieddeficit, i...View AnswerShow Answer

An increase in the budget deficit shifts the demand for loanable funds to the right.

Correct AnswerverifiedShow Answer

If the government's expenditures exceeded its receipts, it would likely

Correct AnswerverifiedShow Answer

List three characteristics of a bond that would make its interest rate higher than otherwise.

Correct Answerverifiedit has a longer term to maturi...View AnswerShow Answer

Suppose the U.S. offered a tax credit for firms that built new factories in the U.S. Then the

Correct AnswerverifiedShow Answer

If the government budget deficit increases, which curve in the market for loanable funds shifts, which direction does it shift, and what happens to the interest rate?

Correct AnswerverifiedThe supply of loanab...View AnswerShow Answer

Crowding out occurs when investment declines because a budget

Correct AnswerverifiedShow Answer

Consider a closed economy. In which of the following cases national saving must equal private saving?

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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National saving is the sum of ___ and _. In a closed economy it is equal to ___ in equilibrium.

Correct Answer
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private saving, publ...
View Answer

Correct Answer
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A saver earns more than he spe...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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The demand for loana...
View Answer

Correct Answer
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When the government increases spending (holding taxes constant), the budget balance ___. This causes the interest rate in the market for loanable funds to _ and investment to ___.

Correct Answer
verified
falls, inc...
View Answer

Correct Answer
verified

Correct Answer
verified

Bonds issued by state and local governments are called _ bonds. Bonds issued by financially shaky corporations are called _ bonds. Of these two, which type of bond usually pays a relatively higher interest rate?

Correct Answer
verified
municipal,...
View Answer

When the government increases its borrowing, the budget ___ increases and government debt _. The resulting change in investment due to this increased government borrowing is called ___.

Correct Answer
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deficit, i...
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Correct Answer
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Correct Answer
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Correct Answer
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it has a longer term to maturi...
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Correct Answer
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Correct Answer
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The supply of loanab...
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Correct Answer
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Correct Answer
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