Question 1

Which of the following would be included as investment in the GDP accounts?

Accepted Answer

A)   the government buys goods from another country
B)   someone buys stock in an American company
C)   a firm increases its capital stock
D)   All of the above are correct.E) B) and C)
F) A) and C)

Question 2

Compared to stocks,bonds offer the holder

Accepted Answer

A)   lower risk and lower potential return.
B)   lower risk and higher potential return.
C)   higher risk and lower potential return.
D)   higher risk and higher potential return.E) C) and D)
F) A) and C)

Question 3

Suppose government expenditures on goods and services and net taxes both decrease,and expenditures fall by more than net taxes.The effects of these changes on the budget deficit cause

Accepted Answer

A)   both the equilibrium interest rate and the equilibrium quantity of loanable funds to fall.
B)   both the equilibrium interest rate and the equilibrium quantity of loanable funds to rise.
C)   the equilibrium interest rate to rise and the equilibrium quantity of loanable funds to fall.
D)   the equilibrium interest rate to fall and the equilibrium quantity of loanable funds to rise.E) B) and D)
F) A) and B)

Question 4

The number of shares of Biggie Corporation stock outstanding in 2007 was 100 million.In 2007,Biggie stock paid a dividend of $2.40 per share and its dividend yield was 4 percent.If the price-earnings ratio is 16,then Biggie's total earnings in 2007 amounted to

Accepted Answer

A)   $1.92 million.
B)   $87.50 million.
C)   $375.00 million.
D)   $960.00 million.E) A) and C)
F) B) and D)

Question 5

Suppose the market for loanable funds is in equilibrium.What would happen in the market for loanable funds,other things the same,if the Congress and President increased the maximum contribution limits to 401(k) and 403(b) tax-deferred retirement accounts?

Accepted Answer

A)   the interest rate and quantity of loanable funds would increase
B)   the interest rate and quantity of loanable funds would decrease.
C)   the interest rate would increase and the quantity of loanable funds would decrease.
D)   the interest rate would decrease and the quantity of loanable funds would increase.E) B) and D)
F) A) and C)

Question 6

If a firm sells a total of 100 shares of stock,then

Accepted Answer

A)   the supply of,and demand for,those shares determine the price per share.
B)   each share represents ownership of 1 percent of the firm.
C)   the firm is engaging in equity finance.
D)   All of the above are correct.E) B) and C)
F) A) and D)

Question 7

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

Question 8

Other things the same,which bond would you expect to pay the highest interest rate?

Accepted Answer

A)   a bond issued by the U.S.government
B)   a bond issued by Microsoft Corporation
C)   a bond issued by the state of Montana
D)   a bond issued by a new chain of Brazilian-style restaurantsE) B) and C)
F) All of the above

Question 9

In the loanable funds model,an increase in an investment tax credit would create a

Accepted Answer

A)   shortage at the former equilibrium interest rate.This shortage would lead to a rise in the interest rate.
B)   shortage at the former equilibrium interest rate.This shortage would lead to a fall in the interest rate.
C)   surplus at the former equilibrium interest rate.This surplus would lead to a rise in the interest rate.
D)   surplus at the former equilibrium interest rate.This surplus would lead to a fall in the interest rate.E) B) and C)
F) All of the above

Question 10

Figure 18-3.The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves. 1 to S2 is called A)  an increase in the supply of loanable funds. B)  an increase in the quantity of loanable funds supplied. C)  a decrease in the supply of loanable funds. D)  a decrease in the quantity of loanable funds supplied." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 18-3.A shift of the supply curve from S1 to S2 is called

Accepted Answer

A)   an increase in the supply of loanable funds.
B)   an increase in the quantity of loanable funds supplied.
C)   a decrease in the supply of loanable funds.
D)   a decrease in the quantity of loanable funds supplied.E) B) and C)
F) A) and B)

Question 11

Suppose the economy is closed with national saving of $2 trillion,consumption of $8 trillion,and government purchases of $1 trillion.What is GDP?

Accepted Answer

A)   $8 trillion
B)   $9 trillion
C)   $10 trillion
D)   $11 trillionE) All of the above
F) None of the above

Question 12

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 e...

Question 13

For an open economy,the equation Y = C + I + G + NX is an identity.If we define national saving,S,as the total income in the economy that is left after paying for consumption and government purchases,then for an open economy,it is true that

Accepted Answer

A)   S = I.
B)   S = 0.
C)   I = S + NX.
D)   S = I + NX.E) B) and D)
F) None of the above

Question 14

Other things the same,bonds are likely to have higher interest rates if they have

Accepted Answer

A)   tax exemptions and short terms.
B)   tax exemptions and long terms.
C)   no tax exemptions and short terms.
D)   no tax exemptions and long terms.E) A) and B)
F) None of the above

Question 15

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) B) and D)
F) All of the above

Question 16

Suppose the government were to replace the income tax with a consumption tax so that interest on savings was not taxed.The result would be that the interest rate

Accepted Answer

A)   and investment both would increase.
B)   and investment both would decrease.
C)   would increase and investment would decrease.
D)   would decrease and investment would increase.E) A) and D)
F) A) and C)

Question 17

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) None of the above

Question 18

The bond market,the stock market,banks,pension funds,and insurance companies are all financial

Accepted Answer

A)   systems.
B)   markets.
C)   institutions.
D)   intermediaries.E) B) and D)
F) B) and C)

Question 19

If there is a surplus of loanable funds,then

Accepted Answer

A)   the quantity of loanable funds demanded is greater than the quantity of loanable funds supplied and the interest rate is above equilibrium.
B)   the quantity of loanable funds demanded is greater than the quantity of loanable funds supplied and the interest rate is below equilibrium.
C)   the quantity of loanable funds supplied is greater than the quantity of loanable funds demanded and the interest rate is above equilibrium.
D)   the quantity of loanable funds supplied is greater than the quantity of loanable funds demanded and the interest rate is below equilibrium.E) All of the above
F) C) and D)

Question 20

Buskin's Corporation has issued 2 million shares of stock.Its earnings were $10 million,of which it retained $6 million.What was the dividend per share?

Accepted Answer

A)   $2.
B)   $3.
C)   $5
D)   None of the above is correct.E) C) and D)
F) None of the above

Exam 18: Saving,investment,and the Financial System

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

Correct Answer
verified

Compared to stocks,bonds offer the holder

Correct Answer
verified

If there is a surplus of loanable funds,then

Correct Answer
verified

In the loanable funds model,an increase in an investment tax credit would create a

Correct Answer
verified

The bond market,the stock market,banks,pension funds,and insurance companies are all financial

Correct Answer
verified

Which of the following would be included as investment in the GDP accounts?

Correct Answer
verified

Suppose government expenditures on goods and services and net taxes both decrease,and expenditures fall by more than net taxes.The effects of these changes on the budget deficit cause

Correct Answer
verified

Figure 18-3.The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves. -Refer to Figure 18-3.A shift of the supply curve from S₁ to S₂ is called

Correct Answer
verified

Buskin's Corporation has issued 2 million shares of stock.Its earnings were $10 million,of which it retained $6 million.What was the dividend per share?

Correct Answer
verified

Suppose the market for loanable funds is in equilibrium.What would happen in the market for loanable funds,other things the same,if the Congress and President increased the maximum contribution limits to 401(k) and 403(b) tax-deferred retirement accounts?

Correct Answer
verified

For an open economy,the equation Y = C + I + G + NX is an identity.If we define national saving,S,as the total income in the economy that is left after paying for consumption and government purchases,then for an open economy,it is true that

Correct Answer
verified

The number of shares of Biggie Corporation stock outstanding in 2007 was 100 million.In 2007,Biggie stock paid a dividend of $2.40 per share and its dividend yield was 4 percent.If the price-earnings ratio is 16,then Biggie's total earnings in 2007 amounted to

Correct Answer
verified

If a firm sells a total of 100 shares of stock,then

Correct Answer
verified

Other things the same,which bond would you expect to pay the highest interest rate?

Correct Answer
verified

Suppose the economy is closed with national saving of $2 trillion,consumption of $8 trillion,and government purchases of $1 trillion.What is GDP?

Correct Answer
verified

Suppose the government were to replace the income tax with a consumption tax so that interest on savings was not taxed.The result would be that the interest rate

Correct Answer
verified

Other things the same,bonds are likely to have higher interest rates if they have

Correct Answer
verified

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

In a closed economy,private saving is

Correct Answer
verified

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 Answer
verified

Exam 18: Saving,investment,and the Financial System

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

Correct AnswerverifiedShow Answer

Compared to stocks,bonds offer the holder

Correct AnswerverifiedShow Answer

If there is a surplus of loanable funds,then

Correct AnswerverifiedShow Answer

In the loanable funds model,an increase in an investment tax credit would create a

Correct AnswerverifiedShow Answer

The bond market,the stock market,banks,pension funds,and insurance companies are all financial

Correct AnswerverifiedShow Answer

Which of the following would be included as investment in the GDP accounts?

Correct AnswerverifiedShow Answer

Suppose government expenditures on goods and services and net taxes both decrease,and expenditures fall by more than net taxes.The effects of these changes on the budget deficit cause

Correct AnswerverifiedShow Answer

Figure 18-3.The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves. -Refer to Figure 18-3.A shift of the supply curve from S1 to S2 is called

Correct AnswerverifiedShow Answer

Buskin's Corporation has issued 2 million shares of stock.Its earnings were $10 million,of which it retained $6 million.What was the dividend per share?

Correct AnswerverifiedShow Answer

Suppose the market for loanable funds is in equilibrium.What would happen in the market for loanable funds,other things the same,if the Congress and President increased the maximum contribution limits to 401(k) and 403(b) tax-deferred retirement accounts?

Correct AnswerverifiedShow Answer

For an open economy,the equation Y = C + I + G + NX is an identity.If we define national saving,S,as the total income in the economy that is left after paying for consumption and government purchases,then for an open economy,it is true that

Correct AnswerverifiedShow Answer

The number of shares of Biggie Corporation stock outstanding in 2007 was 100 million.In 2007,Biggie stock paid a dividend of $2.40 per share and its dividend yield was 4 percent.If the price-earnings ratio is 16,then Biggie's total earnings in 2007 amounted to

Correct AnswerverifiedShow Answer

If a firm sells a total of 100 shares of stock,then

Correct AnswerverifiedShow Answer

Other things the same,which bond would you expect to pay the highest interest rate?

Correct AnswerverifiedShow Answer

Suppose the economy is closed with national saving of $2 trillion,consumption of $8 trillion,and government purchases of $1 trillion.What is GDP?

Correct AnswerverifiedShow Answer

Suppose the government were to replace the income tax with a consumption tax so that interest on savings was not taxed.The result would be that the interest rate

Correct AnswerverifiedShow Answer

Other things the same,bonds are likely to have higher interest rates if they have

Correct AnswerverifiedShow Answer

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

In a closed economy,private saving is

Correct AnswerverifiedShow 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

Correct Answer
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Figure 18-3.The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves. -Refer to Figure 18-3.A shift of the supply curve from S₁ to S₂ is called

Correct Answer
verified

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

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Correct Answer
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