Question 1

Which of the following statements is correct?

Accepted Answer

A)   As a group, economists see no purpose in distinguishing between the nominal interest rate and the real interest rate.
B)   The interest rate that is usually reported is the nominal interest rate.
C)   If the nominal interest rate increases and the inflation rate remains unchanged, then the real interest rate decreases.
D)   All of the above are correct.E) A) and D)
F) B) and D)

Question 2

Mutual funds

Accepted Answer

A)   provide diversification. Shareholders assume all of the risk associated with the mutual fund.
B)   provide diversification. Government insurance eliminates the risk of mutual fund shareholders.
C)   do not provide diversification. Shareholders assume all of the risk associated with the mutual fund
D)   do not provide diversification. Government insurance eliminates the risk of mutual fund shareholders.E) A) and B)
F) C) and D)

Question 3

Short-term bonds are generally

Accepted Answer

A)   less risky than long-term bonds and so they feature higher interest rates.
B)   less risky than long-term bonds and so they feature lower interest rates.
C)   more risky than long-term bonds and so they feature higher interest rates.
D)   more risky than long-term bonds and so they feature lower interest rates.E) B) and C)
F) None of the above

Question 4

If there is a shortage of loanable funds, then

Accepted Answer

A)   the quantity demanded is greater than the quantity supplied and the interest rate will rise.
B)   the quantity demanded is greater than the quantity supplied and the interest rate will fall.
C)   the quantity supplied is greater than the quantity demanded and the interest rate will rise.
D)   the quantity supplied is greater than the quantity demanded and the interest rate will fall.E) A) and B)
F) A) and C)

Question 5

Scenario 26-1. Assume the following information for an imaginary, closed economy.
GDP = $100,000; taxes = $22,000; government purchases = $25,000; national saving = $15,000.
-Refer to Scenario 26-1. For this economy, consumption amounts to

Accepted Answer

A)   $68,000.
B)   $38,000.
C)   $53,000.
D)   $60,000.E) A) and C)
F) B) and C)

Question 6

In the small closed economy of San Lorena, the currency is the denar. Statistics for last year show that private saving was 60 billion denars, taxes were 80 billion denars, government purchases of goods and services were 70 billion denars, there were no transfer payments by the government, and GDP was 400 billion denars. What were consumption and investment in San Lorena?

Accepted Answer

A)   270 billion denars, 50 billion denars
B)   250 billion denars, 60 billion denars
C)   260 billion denars, 70 billion denars
D)   None of the above is correct.E) A) and B)
F) A) and C)

Question 7

As a money management fee, mutual funds usually charge their customers

Accepted Answer

A)   between 0.5 and 2.0 percent of assets each year.
B)   between 1.5 and 3.0 percent of assets each year.
C)   nothing, because they receive commissions from the firms whose stock they buy.
D)   a flat fee of about $50.E) None of the above
F) A) and B)

Question 8

Municipal bonds pay a relatively

Accepted Answer

A)   low rate of interest because of their high default risk and because the interest they pay is subject to federal income tax.
B)   low rate of interest because of their low default risk and because the interest they pay is not subject to federal income tax.
C)   high rate of interest because of their high default risk and because federal taxes must be paid on the interest they pay.
D)   high rate of interest because of their low default risk and because the interest they pay is not subject to federal income tax.E) B) and D)
F) B) and C)

Question 9

The primary advantage of mutual funds is that they

Accepted Answer

A)   always provide the highest return.
B)   always allow people to "beat the market."
C)   allow people to diversify and reduce risk.
D)   allow people to diversify, which increases risk and return.E) C) and D)
F) A) and B)

Question 10

Last quarter in a closed economy GDP was 200,000. Expenditures on capital goods such as business equipment and structures was 19,000, inventory rose 1,000, and new construction of homes was 8,000. Consumption was 135,000 and taxes were 32,000. What was public saving?

Accepted Answer

A)   -4,000
B)   -5,000
C)   -14,000
D)   -6,000E) B) and D)
F) B) and C)

Question 11

Robert buys bonds. Rachel buys a new truck for her landscaping business. Identify both as savers, investors, both, or neither.

Accepted Answer

Robert is ...

Question 12

Scenario 26-2. Assume the following information for an imaginary, closed economy.
GDP = $5 trillion; consumption = $3.1 trillion; government purchases = $0.7 trillion; and taxes = $0.9 trillion.
-Refer to Scenario 26-2. For this economy, national saving is equal to

Accepted Answer

A)   $1.1 trillion.
B)   $2.9 trillion.
C)   $1.2 trillion.
D)   $1.7 trillion.E) C) and D)
F) B) and D)

Question 13

Higher education subsidies in the form of the federal government's student loan program have the potential to

Accepted Answer

A)   reduce the number of people that attend college.
B)   reduce the number of universities and colleges in the future.
C)   create a credit bubble and debt crisis.
D)   reduce the default risk on student loans.E) A) and B)
F) C) and D)

Question 14

The prices of stock traded on exchanges are determined by

Accepted Answer

A)   the Corporate Stock Administration.
B)   the administrators of NASDAQ.
C)   the supply of, and demand for, the stock.
D)   All of the above are correct.E) None of the above
F) A) and D)

Question 15

We interpret the meaning of "loanable funds" as the

Accepted Answer

A)   flow of resources available from private saving.
B)   flow of resources available to fund private investment.
C)   resources borrowed by private investors and by government.
D)   resources lent by private investors and by government.E) A) and B)
F) A) and C)

Question 16

Which of the following events could explain a decrease in interest rates together with an increase in investment?

Accepted Answer

A)   The government went from surplus to deficit.
B)   The government instituted an investment tax credit.
C)   The government reduced the tax rate on savings.
D)   None of the above is correct.E) A) and D)
F) B) and C)

Question 17

Consider the expressions T - G and Y - T - C. Which of the following statements is correct?

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

Question 18

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) None of the above

Question 19

Most entrepreneurs do not have enough money of their own to start their businesses. When they acquire the necessary funds from someone else,

Accepted Answer

A)   their consumption expenditures are being financed by someone else's saving.
B)   their consumption expenditures are being financed by someone else's investment.
C)   their investments are being financed by someone else's saving.
D)   their saving is being financed by someone else's investment.E) None of the above
F) B) and D)

Question 20

The number of shares of Biggie Corporation stock outstanding in 2013 was 100 million. In 2013, Biggie stock paid a dividend of $2.50 per share and its dividend yield was 2 percent. If the price­earnings ratio is 20, then Biggie's total earnings in 2013 amounted to

Accepted Answer

A)   $15.6 million.
B)   $250 million.
C)   $160 million.
D)   $625 million.E) B) and D)
F) A) and C)

Exam 8: Saving, Investment, and the Financial System

The prices of stock traded on exchanges are determined by

Correct Answer
verified

Mutual funds

Correct Answer
verified

Scenario 26-2. Assume the following information for an imaginary, closed economy. GDP = $5 trillion; consumption = $3.1 trillion; government purchases = $0.7 trillion; and taxes = $0.9 trillion. -Refer to Scenario 26-2. For this economy, national saving is equal to

Correct Answer
verified

The primary advantage of mutual funds is that they

Correct Answer
verified

Most entrepreneurs do not have enough money of their own to start their businesses. When they acquire the necessary funds from someone else,

Correct Answer
verified

Robert buys bonds. Rachel buys a new truck for her landscaping business. Identify both as savers, investors, both, or neither.

Correct Answer
verified
Robert is ...
View Answer

If there is a shortage of loanable funds, then

Correct Answer
verified

Short-term bonds are generally

Correct Answer
verified

As a money management fee, mutual funds usually charge their customers

Correct Answer
verified

Last quarter in a closed economy GDP was 200,000. Expenditures on capital goods such as business equipment and structures was 19,000, inventory rose 1,000, and new construction of homes was 8,000. Consumption was 135,000 and taxes were 32,000. What was public saving?

Correct Answer
verified

Consider the expressions T - G and Y - T - C. Which of the following statements is correct?

Correct Answer
verified

Scenario 26-1. Assume the following information for an imaginary, closed economy. GDP = $100,000; taxes = $22,000; government purchases = $25,000; national saving = $15,000. -Refer to Scenario 26-1. For this economy, consumption amounts to

Correct Answer
verified

The number of shares of Biggie Corporation stock outstanding in 2013 was 100 million. In 2013, Biggie stock paid a dividend of $2.50 per share and its dividend yield was 2 percent. If the priceearnings ratio is 20, then Biggie's total earnings in 2013 amounted to

Correct Answer
verified

Correct Answer
verified

Which of the following events could explain a decrease in interest rates together with an increase in investment?

Correct Answer
verified

Which of the following statements is correct?

Correct Answer
verified

We interpret the meaning of "loanable funds" as the

Correct Answer
verified

A perpetuity is distinguished from other bonds in that it

Correct Answer
verified

Higher education subsidies in the form of the federal government's student loan program have the potential to

Correct Answer
verified

Municipal bonds pay a relatively

Correct Answer
verified

Exam 8: Saving, Investment, and the Financial System

The prices of stock traded on exchanges are determined by

Correct AnswerverifiedShow Answer

Mutual funds

Correct AnswerverifiedShow Answer

Scenario 26-2. Assume the following information for an imaginary, closed economy. GDP = $5 trillion; consumption = $3.1 trillion; government purchases = $0.7 trillion; and taxes = $0.9 trillion. -Refer to Scenario 26-2. For this economy, national saving is equal to

Correct AnswerverifiedShow Answer

The primary advantage of mutual funds is that they

Correct AnswerverifiedShow Answer

Most entrepreneurs do not have enough money of their own to start their businesses. When they acquire the necessary funds from someone else,

Correct AnswerverifiedShow Answer

Robert buys bonds. Rachel buys a new truck for her landscaping business. Identify both as savers, investors, both, or neither.

Correct AnswerverifiedRobert is ...View AnswerShow Answer

If there is a shortage of loanable funds, then

Correct AnswerverifiedShow Answer

Short-term bonds are generally

Correct AnswerverifiedShow Answer

As a money management fee, mutual funds usually charge their customers

Correct AnswerverifiedShow Answer

Last quarter in a closed economy GDP was 200,000. Expenditures on capital goods such as business equipment and structures was 19,000, inventory rose 1,000, and new construction of homes was 8,000. Consumption was 135,000 and taxes were 32,000. What was public saving?

Correct AnswerverifiedShow Answer

Consider the expressions T - G and Y - T - C. Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Scenario 26-1. Assume the following information for an imaginary, closed economy. GDP = $100,000; taxes = $22,000; government purchases = $25,000; national saving = $15,000. -Refer to Scenario 26-1. For this economy, consumption amounts to

Correct AnswerverifiedShow Answer

The number of shares of Biggie Corporation stock outstanding in 2013 was 100 million. In 2013, Biggie stock paid a dividend of $2.50 per share and its dividend yield was 2 percent. If the price­earnings ratio is 20, then Biggie's total earnings in 2013 amounted to

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following events could explain a decrease in interest rates together with an increase in investment?

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

We interpret the meaning of "loanable funds" as the

Correct AnswerverifiedShow Answer

A perpetuity is distinguished from other bonds in that it

Correct AnswerverifiedShow Answer

Higher education subsidies in the form of the federal government's student loan program have the potential to

Correct AnswerverifiedShow Answer

Municipal bonds pay a relatively

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Robert is ...
View Answer

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Correct Answer
verified

Correct Answer
verified

The number of shares of Biggie Corporation stock outstanding in 2013 was 100 million. In 2013, Biggie stock paid a dividend of $2.50 per share and its dividend yield was 2 percent. If the priceearnings ratio is 20, then Biggie's total earnings in 2013 amounted to

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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