Question 1

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) C) and D)

Question 2

Managed funds

Accepted Answer

A)  typically have a higher rate of return and higher costs than index funds.
B)  typically have a higher rate of return and lower costs than index funds.
C)  typically have a lower rate of return and higher costs than index funds.
D)  typically have a lower rate of return and lower costs than index funds.E) None of the above
F) All of the above

Question 3

National saving

Accepted Answer

A)  is the total income in the economy that remains after paying for consumption.
B)  is the total income in the economy that remains after paying for consumption and government purchases.
C)  is always greater than investment for a closed economy.
D)  is equal to private saving minus public saving.E) B) and C)
F) A) and D)

Question 4

A stock's dividend yield is the

Accepted Answer

A)  dividend as a percentage of the price per share.
B)  stock price as a percentage of the dividend.
C)  dividend as a percentage of the retained earnings per share.
D)  retained earnings per share as the percentage of the dividend.E) C) and D)
F) A) and C)

Question 5

Melinda buys new equipment for her dental office with funds she borrowed from a bank that raised funds from depositors. Which of the following is correct?

Accepted Answer

A)  Melinda is an investor.
B)  The depositors are investors.
C)  Both Melinda and the depositors are investors.
D)  Neither Melinda nor the depositors are investors.E) B) and D)
F) A) and C)

Question 6

Other things the same, when the interest rate rises,

Accepted Answer

A)  people would want to lend more, making the supply of loanable funds increase.
B)  people would want to lend less, making the supply of loanable funds decrease.
C)  people would want to lend more, making the quantity of loanable funds supplied increase.
D)  people would want to lend less, making the quantity of loanable funds supplied decrease.E) B) and D)
F) B) and C)

Question 7

If the nominal interest rate is 7 percent and the real interest rate is 2 percent, then what is the inflation rate?

Accepted Answer

A)  9.0 percent
B)  5 percent
C)  3.5 percent
D)  None of the above is correct.E) A) and C)
F) B) and D)

Question 8

In the terminology of macroeconomics, what's the difference between a saver and an investor?

Accepted Answer

A saver earns more than he spe...

Question 9

Public saving is T - G, while private saving is Y - T - C.

Accepted Answer

A) True 
 B)False

Question 10

Figure 26-2. The figure depicts a supply-of-loanable-funds curve and two demand-for-loanable-funds curves.
r  Q
-Refer to Figure 26-2. Which of the following events would shift the demand curve from D1 to D2?

Accepted Answer

A)  The government goes from running a budget deficit to running a budget surplus.
B)  Firms become optimistic about the future and, as a result, they plan to increase their purchases of new equipment and construction of new factories.
C)  A change in the tax laws encourages people to consume less and save more.
D)  A change in the tax laws encourages people to consume more and save less.E) B) and D)
F) B) and C)

Question 11

If the government reduces transfer payments, what happens to the budget deficit? What curve does this change in the market for loanable funds, which direction does it shift, and what happens to the equilibrium interest rate?

Accepted Answer

A reduction in transfer paymen...

Question 12

When the government runs a budget deficit,

Accepted Answer

A)  interest rates are lower than they would be if the budget were balanced.
B)  national saving is higher than it would be if the budget were balanced.
C)  investment is lower than it would be if the budget were balanced.
D)  All of the above are correct.E) All of the above
F) A) and D)

Question 13

Which of the following are financial intermediaries?

Accepted Answer

A)  both banks and mutual funds
B)  banks but not mutual funds
C)  mutual funds but not banks
D)  neither banks or mutual fundsE) All of the above
F) C) and D)

Question 14

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 15

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

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is a financial intermediary?

Accepted Answer

A)  a mutual fund
B)  the stock market
C)  a U.S. government bond
D)  a wealthy individual who regularly buys and holds large quantities of government bondsE) A) and C)
F) A) and B)

Question 17

If there is shortage of loanable funds, then

Accepted Answer

A)  the supply for loanable funds shifts right and the demand shifts left.
B)  the supply for loanable funds shifts left and the demand shifts right.
C)  neither curve shifts, but the quantity of loanable funds supplied increases and the quantity demanded decreases as the interest rate rises to equilibrium.
D)  neither curve shifts, but the quantity of loanable funds supplied decreases and the quantity demanded increases as the interest rate falls to equilibrium.E) All of the above
F) B) and C)

Question 18

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

Question 19

Because of differences in tax treatment, municipal bonds pay a higher interest rate than do corporate bonds.

Accepted Answer

A) True 
 B)False

Question 20

An increase in the government budget deficit causes national saving to _____, the interest rate to _____, and investment to _____.

Accepted Answer

decrease, ...

Exam 26: Saving, Investment, and the Financial System

Other things the same, when the interest rate rises,

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 the government reduces transfer payments, what happens to the budget deficit? What curve does this change in the market for loanable funds, which direction does it shift, and what happens to the equilibrium interest rate?

Correct Answer
verified
A reduction in transfer paymen...
View Answer

Short-term bonds are generally

Correct Answer
verified

If the nominal interest rate is 7 percent and the real interest rate is 2 percent, then what is the inflation rate?

Correct Answer
verified

Because of differences in tax treatment, municipal bonds pay a higher interest rate than do corporate bonds.

Correct Answer
verified

National saving

Correct Answer
verified

Managed funds

Correct Answer
verified

In the terminology of macroeconomics, what's the difference between a saver and an investor?

Correct Answer
verified
A saver earns more than he spe...
View Answer

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

Correct Answer
verified

Figure 26-2. The figure depicts a supply-of-loanable-funds curve and two demand-for-loanable-funds curves. r Q -Refer to Figure 26-2. Which of the following events would shift the demand curve from D1 to D2?

Correct Answer
verified

Correct Answer
verified

If there is shortage of loanable funds, then

Correct Answer
verified

When the government runs a budget deficit,

Correct Answer
verified

Public saving is T - G, while private saving is Y - T - C.

Correct Answer
verified

Which of the following is a financial intermediary?

Correct Answer
verified

A stock's dividend yield is the

Correct Answer
verified

Melinda buys new equipment for her dental office with funds she borrowed from a bank that raised funds from depositors. Which of the following is correct?

Correct Answer
verified

An increase in the government budget deficit causes national saving to ___, the interest rate to _, and investment to ___.

Correct Answer
verified
decrease, ...
View Answer

Which of the following are financial intermediaries?

Correct Answer
verified

Exam 26: Saving, Investment, and the Financial System

Other things the same, when the interest rate rises,

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 the government reduces transfer payments, what happens to the budget deficit? What curve does this change in the market for loanable funds, which direction does it shift, and what happens to the equilibrium interest rate?

Correct AnswerverifiedA reduction in transfer paymen...View AnswerShow Answer

Short-term bonds are generally

Correct AnswerverifiedShow Answer

If the nominal interest rate is 7 percent and the real interest rate is 2 percent, then what is the inflation rate?

Correct AnswerverifiedShow Answer

Because of differences in tax treatment, municipal bonds pay a higher interest rate than do corporate bonds.

Correct AnswerverifiedShow Answer

National saving

Correct AnswerverifiedShow Answer

Managed funds

Correct AnswerverifiedShow Answer

In the terminology of macroeconomics, what's the difference between a saver and an investor?

Correct AnswerverifiedA saver earns more than he spe...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Figure 26-2. The figure depicts a supply-of-loanable-funds curve and two demand-for-loanable-funds curves. r Q -Refer to Figure 26-2. Which of the following events would shift the demand curve from D1 to D2?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If there is shortage of loanable funds, then

Correct AnswerverifiedShow Answer

When the government runs a budget deficit,

Correct AnswerverifiedShow Answer

Public saving is T - G, while private saving is Y - T - C.

Correct AnswerverifiedShow Answer

Which of the following is a financial intermediary?

Correct AnswerverifiedShow Answer

A stock's dividend yield is the

Correct AnswerverifiedShow Answer

Melinda buys new equipment for her dental office with funds she borrowed from a bank that raised funds from depositors. Which of the following is correct?

Correct AnswerverifiedShow Answer

An increase in the government budget deficit causes national saving to _____, the interest rate to _____, and investment to _____.

Correct Answerverifieddecrease, ...View AnswerShow Answer

Which of the following are financial intermediaries?

Correct AnswerverifiedShow Answer

Correct Answer
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Robert is ...
View Answer

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A reduction in transfer paymen...
View Answer

Correct Answer
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Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
verified

Correct Answer
verified
A saver earns more than he spe...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

An increase in the government budget deficit causes national saving to ___, the interest rate to _, and investment to ___.

Correct Answer
verified
decrease, ...
View Answer

Correct Answer
verified