Question 1

Other things the same,a government budget deficit

Accepted Answer

A)  reduces public saving, but not national saving..
B)  reduces national saving, but not public saving.
C)  reduces both public and national saving.
D)  reduces neither public saving nor national saving.E) C) and D)
F) A) and C)

Question 2

According to the definitions of national saving and private saving,if Y,C,and G remained the same,an increase in taxes would

Accepted Answer

A)  raise national saving and private saving.
B)  raise national saving and reduce private saving.
C)  leave national saving and private saving unchanged.
D)  leave national saving unchanged and reduce private saving.E) B) and C)
F) A) and D)

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

A perpetuity is distinguished from other bonds in that it

Accepted Answer

A)  pays continuously compounded interest.
B)  pays interest only when it matures.
C)  never matures.
D)  will be used to purchase another bond when it matures unless the owner specifies otherwise.E) C) and D)
F) B) and C)

Question 5

In examining the national income accounts of the closed economy of Nepotocracy you see that in this year it had taxes of $100 billion,transfers of $40 billion,and government purchases of goods and services of $80 billion.You also notice that last year it had private saving of $50 billion and investment of $70 billion.In which year did Nepotcracy have a budget deficit of $20 billion?

Accepted Answer

A)  this year and last year
B)  this year but not last year
C)  last year but not this year
D)  neither this year nor last yearE) All of the above
F) None of the above

Question 6

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

Question 7

Consider T-G and Y-T-C.

Accepted Answer

A)  Each one of these is equal to national saving.
B)  Each one of these is equal to public saving.
C)  The first of these is private saving, the second one is public saving.
D)  The first of these is public saving, the second one is private saving.E) C) and D)
F) A) and C)

Question 8

If the inflation rate is 2 percent and the real interest rate is 3 percent,then the nominal interest rate is

Accepted Answer

A)  5 percent.
B)  1 percent.
C)  1.5 percent
D)  .67 percent.E) A) and B)
F) B) and C)

Question 9

Which of the two bonds in each example would you expect to generally pay the higher interest rate? Explain why.
a.a U.S.government bond or a Brazilian government bond
b.a U.S.government bond or a municipal bond with the same term and issued by a creditworthy municipality.
c.a 6-month Treasury bill or a 20-year Treasury bond
d.a Microsoft bond or a bond issued by a new recording company

Accepted Answer

a. The Brazilian government bond would l...

Question 10

Index funds

Accepted Answer

A)  buy all the stocks in a given stock index.
B)  promise to beat the market by a certain percentage known as an index.
C)  provide a return that is adjusted for changes in the consumer price index.
D)  buy industries within a particular category of the North American Industry Classification System.E) A) and B)
F) A) and C)

Question 11

In the late summer of 2005 some regions of the country were suffering from drought.What effect would we expect this to have on the stock of companies like John Deere that manufacture farm equipment?

Accepted Answer

A)  raise the demand for existing shares of the stock, causing the price to rise
B)  decrease the demand for existing shares of the stock, causing the price to fall
C)  raise the supply of the existing shares of stock, causing the price to rise
D)  raise the supply of the existing shares of stock, causing the price to fallE) B) and C)
F) All of the above

Question 12

A certificate of indebtedness that specifies the obligations of the borrower to the holder is called a

Accepted Answer

A)  bond.
B)  stock.
C)  mutual fund.
D)  All of the above are correct.E) C) and D)
F) All of the above

Question 13

According to the definitions of national saving and public saving,if Y,C,and G remained the same,an increase in taxes would

Accepted Answer

A)  raise national saving and public saving.
B)  raise national saving and raise public saving.
C)  leave national saving and public saving unchanged.
D)  leave national saving unchanged and raise public saving.E) B) and C)
F) C) and D)

Question 14

Other things the same,as the maturity of a bond becomes longer,the bond will pay

Accepted Answer

A)  less interest because it has less risk.
B)  less interest because it has more risk.
C)  more interest because it has more risk
D)  There is no relation between term to maturity and risk.E) B) and C)
F) A) and B)

Question 15

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) B) and C)

Question 16

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 C)
F) C) and D)

Question 17

Assuming that the bonds below have the same term and principal and that the state or local government which issues the municipal bond has a good credit rating,which list has bonds ordered from the one that pays the most interest to the one that pays the least interest?

Accepted Answer

A)  corporate bond, municipal bond, U.S.government bond
B)  corporate bond, U.S.government bond, municipal bond
C)  municipal bond, U.S.government bond, corporate bond
D)  U.S.government bond, municipal bond, corporate bondE) A) and B)
F) B) and D)

Question 18

Thomas Publishing has a price of $20 a share,outstanding shares of 2.5 million,retained earnings of $1 million dollars,and a dividend yield of 1 percent.It has a price to earnings ratio which is

Accepted Answer

A)  high, perhaps indicating that people expect future earnings to rise.
B)  high, perhaps indicating that people expect future earnings to fall.
C)  low, perhaps indicating that people expect future earnings to rise.
D)  low, perhaps indicating that people expect future earnings to fall.E) All of the above
F) B) and D)

Question 19

A decrease in taxes on interest income would increase the interest rate.

Accepted Answer

A) True 
 B)False

Question 20

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 B)
F) A) and C)

Exam 26: Saving, investment, and the Financial System

A decrease in taxes on interest income would increase the interest rate.

Correct Answer
verified

Thomas Publishing has a price of $20 a share,outstanding shares of 2.5 million,retained earnings of $1 million dollars,and a dividend yield of 1 percent.It has a price to earnings ratio which is

Correct Answer
verified

Assuming that the bonds below have the same term and principal and that the state or local government which issues the municipal bond has a good credit rating,which list has bonds ordered from the one that pays the most interest to the one that pays the least interest?

Correct Answer
verified

A perpetuity is distinguished from other bonds in that it

Correct Answer
verified

Correct Answer
verified
a. The Brazilian government bond would l...
View Answer

Other things the same,as the maturity of a bond becomes longer,the bond will pay

Correct Answer
verified

In the late summer of 2005 some regions of the country were suffering from drought.What effect would we expect this to have on the stock of companies like John Deere that manufacture farm equipment?

Correct Answer
verified

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

Correct Answer
verified

According to the definitions of national saving and private saving,if Y,C,and G remained the same,an increase in taxes would

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

Index funds

Correct Answer
verified

A bond that never matures is known as a

Correct Answer
verified

In a closed economy,private saving is

Correct Answer
verified

If the inflation rate is 2 percent and the real interest rate is 3 percent,then the nominal interest rate is

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

Consider T-G and Y-T-C.

Correct Answer
verified

Other things the same,a government budget deficit

Correct Answer
verified

According to the definitions of national saving and public saving,if Y,C,and G remained the same,an increase in taxes would

Correct Answer
verified

A certificate of indebtedness that specifies the obligations of the borrower to the holder is called a

Correct Answer
verified

Exam 26: Saving, investment, and the Financial System

A decrease in taxes on interest income would increase the interest rate.

Correct AnswerverifiedShow Answer

Thomas Publishing has a price of $20 a share,outstanding shares of 2.5 million,retained earnings of $1 million dollars,and a dividend yield of 1 percent.It has a price to earnings ratio which is

Correct AnswerverifiedShow Answer

Assuming that the bonds below have the same term and principal and that the state or local government which issues the municipal bond has a good credit rating,which list has bonds ordered from the one that pays the most interest to the one that pays the least interest?

Correct AnswerverifiedShow Answer

A perpetuity is distinguished from other bonds in that it

Correct AnswerverifiedShow Answer

Correct Answerverifieda. The Brazilian government bond would l...View AnswerShow Answer

Other things the same,as the maturity of a bond becomes longer,the bond will pay

Correct AnswerverifiedShow Answer

In the late summer of 2005 some regions of the country were suffering from drought.What effect would we expect this to have on the stock of companies like John Deere that manufacture farm equipment?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

According to the definitions of national saving and private saving,if Y,C,and G remained the same,an increase in taxes would

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Index funds

Correct AnswerverifiedShow Answer

A bond that never matures is known as a

Correct AnswerverifiedShow Answer

In a closed economy,private saving is

Correct AnswerverifiedShow Answer

If the inflation rate is 2 percent and the real interest rate is 3 percent,then the nominal interest rate is

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

Consider T-G and Y-T-C.

Correct AnswerverifiedShow Answer

Other things the same,a government budget deficit

Correct AnswerverifiedShow Answer

According to the definitions of national saving and public saving,if Y,C,and G remained the same,an increase in taxes would

Correct AnswerverifiedShow Answer

A certificate of indebtedness that specifies the obligations of the borrower to the holder is called a

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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a. The Brazilian government bond would l...
View Answer

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