Question 1

Use the following table to answer the following questions.
Table 8-2
 
-Refer to Table 8-2. Which company had the highest dollar dividend?

Accepted Answer

A)   Boeing Co.
B)   Eli Lilly and Co.
C)   H. J. Heinz and Co.
D)   Kellog Co.E) A) and B)
F) None of the above

Question 2

Profits not paid out to stockholders are

Accepted Answer

A)   retained earnings.
B)   known as dividends.
C)   the denominator in the price-earnings ratio.
D)   All of the above are correct.E) B) and C)
F) A) and D)

Question 3

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

Question 4

Your brother-in-law wants to buy either stock or bonds in Cedar Valley Furniture, which manufactures wooden furniture. He wants your advice on whether to buy stock or bonds. Explain how each of his quotes below should affect his choice between the stock and the bond.
a."I have reason to believe that people are soon going to find rocking chairs have health benefits."
b."I would like to tell people I am part owner of Cedar Valley Furniture."
c."I do not want to take on much risk."

Accepted Answer

a.
Presumably, when this happens, unless...

Question 5

When a large, well-known corporation wishes to borrow directly from the public, it can

Accepted Answer

A)   sell bonds.
B)   sell shares of stock.
C)   go to a bank for a loan.
D)   All of the above are correct.E) B) and D)
F) A) and C)

Question 6

If a reform of the tax laws encourages greater saving, the result would be

Accepted Answer

A)   higher interest rates and greater investment.
B)   higher interest rates and less investment.
C)   lower interest rates and greater investment.
D)   lower interest rate and less investment.E) C) and D)
F) B) and D)

Question 7

Figure 8-3. The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves.
 
-Refer to Figure 8-3. Which of the following movements would be consistent with the government budget going from deficit to surplus and the simultaneous enactment of an investment tax credit?

Accepted Answer

A)   a movement from Point A to Point C
B)   a movement from Point B to Point A
C)   a movement from Point B to Point F
D)   a movement from Point C to Point BE) B) and C)
F) B) and D)

Question 8

When a country saves a larger portion of its GDP than it did before, it will have

Accepted Answer

A)   more capital and higher productivity.
B)   more capital and lower productivity.
C)   less capital and higher productivity.
D)   less capital and lower productivity.E) B) and C)
F) None of the above

Question 9

Corporations receive no proceeds from the resale of their stock.

Accepted Answer

A) True 
 B)False

Question 10

Scenario 8-3. Assume the following information for an imaginary, open economy.
Consumption = $1,000; investment = $300; net exports = $100;
taxes = $230; private saving = $200; and national saving = $150.
-Refer to Scenario 8-3. For this economy, government purchases amount to

Accepted Answer

A)   $130.
B)   $180.
C)   $280.
D)   $330.E) A) and D)
F) B) and C)

Question 11

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

Question 12

Which of the following is both a financial institution and a financial intermediary?

Accepted Answer

A)   banks
B)   stock exchanges
C)   the bond market
D)   All of the above are correct.E) B) and D)
F) A) and D)

Question 13

A larger budget surplus

Accepted Answer

A)   raises the interest rate and investment.
B)   reduces the interest rate and investment.
C)   raises the interest rate and reduces investment.
D)   reduces the interest rate and raises investment.E) B) and D)
F) A) and B)

Question 14

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

Question 15

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 16

Suppose the issuer of a bond fails to pay some of the interest or principal that was promised to the bondholders. This failure is referred to as a

Accepted Answer

A)   breach.
B)   default.
C)   risk.
D)   term failure.E) A) and B)
F) A) and C)

Question 17

All else equal, when people become more optimistic about a company's future, the

Accepted Answer

A)   supply of the stock and the price will both rise.
B)   supply of the stock and the price will both fall.
C)   demand for the stock and the price will both rise.
D)   demand for the stock and the price will both fall.E) A) and D)
F) All of the above

Question 18

Which of the following restrictions implies that investment exceeds private saving for a closed economy?

Accepted Answer

A)   The economy has no government.
B)   The economy's government is running a budget deficit.
C)   The economy's government is running a budget surplus.
D)   No restriction is necessary; investment and private saving are equal for all closed economies.E) B) and D)
F) C) and D)

Question 19

A budget surplus is created if

Accepted Answer

A)   the government sells more bonds than it buys back.
B)   the government spends more than it receives in tax revenue.
C)   private saving is greater than zero.
D)   None of the above is correct.E) None of the above
F) A) and C)

Question 20

Which of the following is correct?

Accepted Answer

A)   The maturity of a bond refers to the amount to be paid back.
B)   The principal of the bond refers to the person selling the bond.
C)   A bond buyer cannot sell a bond before it matures.
D)   None of the above is correct.E) None of the above
F) A) and B)

Exam 8: Saving, Investment, and the Financial System

Correct Answer
verified
a.
Presumably, when this happens, unless...
View Answer

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

Correct Answer
verified

When a country saves a larger portion of its GDP than it did before, it will have

Correct Answer
verified

If a reform of the tax laws encourages greater saving, the result would be

Correct Answer
verified

All else equal, when people become more optimistic about a company's future, the

Correct Answer
verified

When a large, well-known corporation wishes to borrow directly from the public, it can

Correct Answer
verified

Corporations receive no proceeds from the resale of their stock.

Correct Answer
verified

Which of the following is correct?

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

Scenario 8-3. Assume the following information for an imaginary, open economy. Consumption = $1,000; investment = $300; net exports = $100; taxes = $230; private saving = $200; and national saving = $150. -Refer to Scenario 8-3. For this economy, government purchases amount to

Correct Answer
verified

Profits not paid out to stockholders are

Correct Answer
verified

Which of the following restrictions implies that investment exceeds private saving for a closed economy?

Correct Answer
verified

Suppose the issuer of a bond fails to pay some of the interest or principal that was promised to the bondholders. This failure is referred to as a

Correct Answer
verified

Figure 8-3. The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves. -Refer to Figure 8-3. Which of the following movements would be consistent with the government budget going from deficit to surplus and the simultaneous enactment of an investment tax credit?

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

Use the following table to answer the following questions. Table 8-2 -Refer to Table 8-2. Which company had the highest dollar dividend?

Correct Answer
verified

Which of the following is both a financial institution and a financial intermediary?

Correct Answer
verified

A budget surplus is created if

Correct Answer
verified

A larger budget surplus

Correct Answer
verified

Exam 8: Saving, Investment, and the Financial System

Correct Answerverifieda.Presumably, when this happens, unless...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

When a country saves a larger portion of its GDP than it did before, it will have

Correct AnswerverifiedShow Answer

If a reform of the tax laws encourages greater saving, the result would be

Correct AnswerverifiedShow Answer

All else equal, when people become more optimistic about a company's future, the

Correct AnswerverifiedShow Answer

When a large, well-known corporation wishes to borrow directly from the public, it can

Correct AnswerverifiedShow Answer

Corporations receive no proceeds from the resale of their stock.

Correct AnswerverifiedShow Answer

Which of the following is correct?

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

Scenario 8-3. Assume the following information for an imaginary, open economy. Consumption = $1,000; investment = $300; net exports = $100; taxes = $230; private saving = $200; and national saving = $150. -Refer to Scenario 8-3. For this economy, government purchases amount to

Correct AnswerverifiedShow Answer

Profits not paid out to stockholders are

Correct AnswerverifiedShow Answer

Which of the following restrictions implies that investment exceeds private saving for a closed economy?

Correct AnswerverifiedShow Answer

Suppose the issuer of a bond fails to pay some of the interest or principal that was promised to the bondholders. This failure is referred to as a

Correct AnswerverifiedShow Answer

Figure 8-3. The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves. -Refer to Figure 8-3. Which of the following movements would be consistent with the government budget going from deficit to surplus and the simultaneous enactment of an investment tax credit?

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

Use the following table to answer the following questions. Table 8-2 -Refer to Table 8-2. Which company had the highest dollar dividend?

Correct AnswerverifiedShow Answer

Which of the following is both a financial institution and a financial intermediary?

Correct AnswerverifiedShow Answer

A budget surplus is created if

Correct AnswerverifiedShow Answer

A larger budget surplus

Correct AnswerverifiedShow Answer

Correct Answer
verified
a.
Presumably, when this happens, unless...
View Answer

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