Question 1

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

Question 2

Scenario 18-1.Assume the following information for an imaginary,closed economy.
 
-Refer to Scenario 18-1.This economy's government is running a

Accepted Answer

A)   budget surplus of $3,000.
B)   budget surplus of $6,000.
C)   budget deficit of $3,000.
D)   budget deficit of $6,000.E) A) and B)
F) A) and C)

Question 3

If Huedepool Beer runs into financial difficulty,the stockholders as

Accepted Answer

A)   part owners of Huedepool are paid before bondholders get paid anything at all.
B)   part owners of Huedepool are paid after bondholders get paid.
C)   creditors of Huedepool are paid before bondholders get paid anything at all.
D)   creditors of Huedepool are paid after bondholders get paid.E) A) and D)
F) None of the above

Question 4

The term crowding out refers to decreases in the interest rate caused by government budget surpluses.

Accepted Answer

A) True 
 B)False

Question 5

If the nominal interest rate is 7 percent and the real interest rate is 2 percent,then what is the inflation rate?

Accepted Answer

A)   9.0 percent
B)   5 percent
C)   3.5 percent
D)   None of the above is correct.E) A) and B)
F) A) and D)

Question 6

Given that Monika's income exceeds her expenditures,Monika is best described as a

Accepted Answer

A)   saver or as a supplier of funds.
B)   saver or as a demander of funds.
C)   borrower or as a supplier of funds.
D)   borrower or as a demander of funds.E) B) and D)
F) A) and B)

Question 7

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

Question 8

Scenario 18-2.Assume the following information for an imaginary,closed economy.
GDP = $200,000; consumption = $120,000;
government purchases = $35,000; and taxes = $25,000.
-Refer to Scenario 18-2.For this economy,public saving is equal to

Accepted Answer

A)   $-10,000 and the government is running a budget deficit of $10,000.
B)   $-10,000 and the government is running a budget surplus of $10,000.
C)   $10,000 and the government is running a budget deficit of $10,000.
D)   $10,000 and the government is running a budget surplus of $10,000.E) A) and D)
F) A) and C)

Question 9

Which of the following is not always correct for a closed economy?

Accepted Answer

A)   National saving equals private saving plus public saving.
B)   Net exports equal zero.
C)   Real GDP measures both income and expenditures.
D)   Private saving equals investment.E) B) and C)
F) A) and D)

Question 10

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

Accepted Answer

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

Question 11

For an imaginary economy,when the real interest rate is 5 percent,the quantity of loanable funds demanded is $100,000 and the quantity of loanable funds supplied is $100,000.Currently,the nominal interest rate is 6 percent and the inflation rate is 2 percent.Currently,

Accepted Answer

A)   the market for loanable funds is in equilibrium.
B)   the quantity of loanable funds supplied exceeds the quantity of loanable funds demanded,and as a result the real interest rate will rise.
C)   the quantity of loanable funds supplied exceeds the quantity of loanable funds demanded,and as a result the real interest rate will fall.
D)   the quantity of loanable funds demanded exceeds the quantity of loanable funds supplied,and as a result the real interest rate will rise.E) B) and C)
F) None of the above

Question 12

In which case would people desire to borrow the most?

Accepted Answer

A)   the nominal interest rate is 8% and the inflation rate is 7%
B)   the nominal interest rate is 7% and the inflation rate is 5%
C)   the nominal interest rate is 6% and the inflation rate is 3%
D)   the nominal interest rate is 5% and the inflation rate is 1%E) A) and C)
F) None of the above

Question 13

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

Question 14

The ratio of debt to GDP in the United States

Accepted Answer

A)   tends to fall during wars.
B)   fell during the decade that began in 2000.
C)   fell during the late 1990s.
D)   None of the above is correct.E) B) and D)
F) A) and D)

Question 15

Which of the following is not correct?

Accepted Answer

A)   If you buy a bond from a corporation,you can sell the bond to someone else before it matures.
B)   Term refers to the scheduling of periodic interest rate payments on a bond.
C)   A bond is an IOU.
D)   There are millions of different bonds in the U.S.economy.E) C) and D)
F) All of the above

Question 16

When economists refer to investment,they mean the purchasing of stocks and bonds and other types of saving.

Accepted Answer

A) True 
 B)False

Question 17

Banks and mutual funds are examples of financial markets.

Accepted Answer

A) True 
 B)False

Question 18

Jerry has the choice of two bonds,one that pays 3 percent interest and one that pays 6 percent interest.Which of the following is most likely?

Accepted Answer

A)   The 6 percent bond is less risky than the 3 percent bond.
B)   The 6 percent bond is a U.S.government bond,and the 3 percent bond is a junk bond.
C)   The 6 percent bond has a longer term than the 3 percent bond.
D)   The 6 percent bond is a municipal bond,and the 3 percent bond is a U.S.government bond.E) All of the above
F) A) and D)

Question 19

Which of the following is not correct?

Accepted Answer

A)   Gross domestic product is both total income in an economy and total expenditures on the economy's output of goods and services.
B)   In a closed economy net exports are zero.
C)   National saving is the sum of private saving and public saving.
D)   Purchases of capital goods are excluded from GDP.E) A) and D)
F) B) and C)

Question 20

Most entrepreneurs finance their purchases of real capital using their past saving.

Accepted Answer

A) True 
 B)False

Exam 18: Saving,investment,and the Financial System

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

If Huedepool Beer runs into financial difficulty,the stockholders as

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Which of the following is not always correct for a closed economy?

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For an imaginary economy,when the real interest rate is 5 percent,the quantity of loanable funds demanded is $100,000 and the quantity of loanable funds supplied is $100,000.Currently,the nominal interest rate is 6 percent and the inflation rate is 2 percent.Currently,

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The ratio of debt to GDP in the United States

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Which of the following is not correct?

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Most entrepreneurs finance their purchases of real capital using their past saving.

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Given that Monika's income exceeds her expenditures,Monika is best described as a

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

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

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In which case would people desire to borrow the most?

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Which of the following is not correct?

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If the nominal interest rate is 7 percent and the real interest rate is 2 percent,then what is the inflation rate?

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When economists refer to investment,they mean the purchasing of stocks and bonds and other types of saving.

Correct AnswerverifiedShow Answer

Banks and mutual funds are examples of financial markets.

Correct AnswerverifiedShow Answer

Scenario 18-1.Assume the following information for an imaginary,closed economy. -Refer to Scenario 18-1.This economy's government is running a

Correct AnswerverifiedShow Answer

Jerry has the choice of two bonds,one that pays 3 percent interest and one that pays 6 percent interest.Which of the following is most likely?

Correct AnswerverifiedShow Answer

Scenario 18-2.Assume the following information for an imaginary,closed economy. GDP = $200,000; consumption = $120,000; government purchases = $35,000; and taxes = $25,000. -Refer to Scenario 18-2.For this economy,public saving is equal to

Correct AnswerverifiedShow Answer

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

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The term crowding out refers to decreases in the interest rate caused by government budget surpluses.

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