Question 1

National saving is equal to Y - T - C.

Accepted Answer

A) True 
 B)False

Question 2

A closed economy

Accepted Answer

A)   does not engage in international trade of goods and services.
B)   does not engage in international borrowing or lending.
C)   both A and B
D)   engages in international borrowing and lending.E) None of the above
F) All of the above

Question 3

Index funds

Accepted Answer

A)   typically have a higher rate of return and higher costs than managed mutual funds.
B)   typically have a higher rate of return and lower costs than managed mutual funds.
C)   typically have a lower rate of return and higher costs than managed mutual funds.
D)   typically have a lower rate of return and lower costs than managed mutual funds.E) B) and C)
F) A) and D)

Question 4

You have some estimates of national accounts numbers for a closed economy for the coming year. Under one set of expectations, government purchases will be $30 billion, transfer payments will be $10 billion, and taxes will be $45 billion. Under another set of expectations, GDP will be $200 billion, taxes will be $50 billion, transfer payments will be $20 billion, consumption will be $120 million, and investment will be $40 billion. Based on these numbers in the first case there should be a

Accepted Answer

A)   $15 billion surplus, and in the second case a $10 billion surplus.
B)   $15 billion surplus, and in the second case a $30 billion deficit.
C)   $5 billion surplus, and in the second case a $10 billion deficit.
D)   $5 billion surplus, and in the second case a $30 billion deficit.E) All of the above
F) A) and D)

Question 5

An increase in the government's budget surplus means

Accepted Answer

A)   public saving is greater than $0 and increasing.
B)   public saving is greater than $0 and decreasing.
C)   public saving is less than $0 and increasing.
D)   public saving is less than $0 and decreasing.E) All of the above
F) C) and D)

Question 6

Skeptics of government policy to reduce taxes on saving argue that it would primarily benefit the rich.

Accepted Answer

A) True 
 B)False

Question 7

Queen City Sausage stock is selling at $40 per share, it has retained earnings of $1.00 per share, and dividends of $1.00 per share. What is the price-earnings ratio and what is the dividend yield?

Accepted Answer

A)   20, 2.5 percent.
B)   20, 5 percent.
C)   40, 2.5 percent.
D)   40, 5 percent.E) C) and D)
F) None of the above

Question 8

Morgan, a financial advisor, has told her clients the following things. Which of her statements is not correct?

Accepted Answer

A)   "U.S. government bonds generally pay a higher rate of interest than corporate bonds."
B)   "The interest received on corporate bonds is taxable."
C)   "U.S. government bonds have the lowest default risk."
D)   "If you purchase a municipal bond, you can sell it before it matures."E) None of the above
F) A) and B)

Question 9

The country of Meditor, a small country with a closed economy, uses the merit as its currency. Recent national income statistics showed that it had GDP of $600 million merits, no government transfer payments, taxes of $150 million merits, a budget surplus of $40 billion merits, and investment of $100 billion merits. What were its consumption and government expenditures on goods and services?

Accepted Answer

A)   $460 million merits and $150 million merits
B)   $310 million merits and $190 million merits
C)   $350 million merits and $190 million merits
D)   $390 million merits and $110 million meritsE) A) and C)
F) All of the above

Question 10

The ratio of debt to GDP in the United States

Accepted Answer

A)   tends to rise during wars.
B)   rose during the decade that began in 2001.
C)   fell during the late 1990s.
D)   All of the above are correct.E) B) and C)
F) C) and D)

Question 11

If a share of stock in Skylight Chili sells for $75, the retained earnings per share are $5, and the dividend per share is $2, then the price-earnings ratio is 15.

Accepted Answer

A) True 
 B)False

Question 12

The price of a stock will rise if

Accepted Answer

A)   the managers of a stock exchange decide the price should be higher.
B)   the demand for the stock rises.
C)   the supply of the stock rises.
D)   None of the above are correct.E) None of the above
F) A) and D)

Question 13

In a small closed economy investment is $50 billion and private saving is $45 billion. What are public saving and national saving?

Accepted Answer

A)   $5 billion and $45 billion
B)   -$5 billion and $45 billion
C)   $5 billion and $50 billion
D)   -$5 billion and $50 billionE) A) and B)
F) All of the above

Question 14

Late in the 2000-2009 decade, real estate prices in the U.S. fell by a greater percentage than they had fallen since the

Accepted Answer

A)   1890s.
B)   1930s.
C)   1950s.
D)   1970s.E) B) and C)
F) A) and D)

Question 15

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

Question 16

A bond that never matures is known as a

Accepted Answer

A)   perpetuity.
B)   an intermediary bond.
C)   an indexed bond.
D)   a junk bond.E) C) and D)
F) B) and D)

Question 17

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 B)
F) All of the above

Question 18

Which of the following is a certificate of indebtedness?

Accepted Answer

A)   both stocks and bonds
B)   stocks but not bonds
C)   bonds but not stocks
D)   neither stocks nor bondsE) B) and C)
F) A) and D)

Question 19

Other things the same, the higher the rate of saving and investment in a country, the higher will be the standard of living in the future.

Accepted Answer

A) True 
 B)False

Question 20

Public saving is the difference between and .

Accepted Answer

tax revenue, governm...

Exam 8: Saving, Investment, and the Financial System

Other things the same, the higher the rate of saving and investment in a country, the higher will be the standard of living in the future.

Correct Answer
verified

The ratio of debt to GDP in the United States

Correct Answer
verified

Morgan, a financial advisor, has told her clients the following things. Which of her statements is not correct?

Correct Answer
verified

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

Correct Answer
verified

A closed economy

Correct Answer
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In a small closed economy investment is $50 billion and private saving is $45 billion. What are public saving and national saving?

Correct Answer
verified

Correct Answer
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Skeptics of government policy to reduce taxes on saving argue that it would primarily benefit the rich.

Correct Answer
verified

Which of the following is a certificate of indebtedness?

Correct Answer
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Public saving is the difference between and .

Correct Answer
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tax revenue, governm...
View Answer

The price of a stock will rise if

Correct Answer
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National saving is equal to Y - T - C.

Correct Answer
verified

An increase in the government's budget surplus means

Correct Answer
verified

Correct Answer
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Index funds

Correct Answer
verified

If Huedepool Beer runs into financial difficulty, the stockholders as

Correct Answer
verified

Queen City Sausage stock is selling at $40 per share, it has retained earnings of $1.00 per share, and dividends of $1.00 per share. What is the price-earnings ratio and what is the dividend yield?

Correct Answer
verified

Late in the 2000-2009 decade, real estate prices in the U.S. fell by a greater percentage than they had fallen since the

Correct Answer
verified

A bond that never matures is known as a

Correct Answer
verified

If a share of stock in Skylight Chili sells for $75, the retained earnings per share are $5, and the dividend per share is $2, then the price-earnings ratio is 15.

Correct Answer
verified

Exam 8: Saving, Investment, and the Financial System

Other things the same, the higher the rate of saving and investment in a country, the higher will be the standard of living in the future.

Correct AnswerverifiedShow Answer

The ratio of debt to GDP in the United States

Correct AnswerverifiedShow Answer

Morgan, a financial advisor, has told her clients the following things. Which of her statements is not correct?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A closed economy

Correct AnswerverifiedShow Answer

In a small closed economy investment is $50 billion and private saving is $45 billion. What are public saving and national saving?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Skeptics of government policy to reduce taxes on saving argue that it would primarily benefit the rich.

Correct AnswerverifiedShow Answer

Which of the following is a certificate of indebtedness?

Correct AnswerverifiedShow Answer

Public saving is the difference between and .

Correct Answerverifiedtax revenue, governm...View AnswerShow Answer

The price of a stock will rise if

Correct AnswerverifiedShow Answer

National saving is equal to Y - T - C.

Correct AnswerverifiedShow Answer

An increase in the government's budget surplus means

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Index funds

Correct AnswerverifiedShow Answer

If Huedepool Beer runs into financial difficulty, the stockholders as

Correct AnswerverifiedShow Answer

Queen City Sausage stock is selling at $40 per share, it has retained earnings of $1.00 per share, and dividends of $1.00 per share. What is the price-earnings ratio and what is the dividend yield?

Correct AnswerverifiedShow Answer

Late in the 2000-2009 decade, real estate prices in the U.S. fell by a greater percentage than they had fallen since the

Correct AnswerverifiedShow Answer

A bond that never matures is known as a

Correct AnswerverifiedShow Answer

If a share of stock in Skylight Chili sells for $75, the retained earnings per share are $5, and the dividend per share is $2, then the price-earnings ratio is 15.

Correct AnswerverifiedShow Answer

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tax revenue, governm...
View Answer

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