Question 1

In a small closed economy investment is $50 billion and private saving is $55 billion. What are public saving and national saving?

Accepted Answer

A)  $60 billion and $5 billion
B)  $50 billion and -$5 billion
C)  $5 billion and $60 billion
D)  -$5 billion and $50 billionE) A) and B)
F) All of the above

Question 2

An increase in the budget deficit would cause a

Accepted Answer

A)  shortage of loanable funds at the original interest rate, which would lead to falling interest rates.
B)  surplus of loanable funds at the original interest rate, which would lead to rising interest rates.
C)  shortage of loanable funds at the original interest rate, which would lead to rising interest rates.
D)  surplus of loanable funds at the original interest rate, which would lead to falling interest rates.E) B) and D)
F) A) and C)

Question 3

The country of Bienmundo does not trade with any other country. Its GDP is $30 billion. Its government purchases $5 billion worth of goods and services each year, collects $7 billion in taxes, and provides $3 billion in transfer payments to households. Private saving in Bienmundo amounts to $5 billion. What are consumption and investment in Bienmundo?

Accepted Answer

A)  $18 billion and $5 billion, respectively
B)  $21 billion and $4 billion, respectively
C)  $13 billion and $7 billion, respectively
D)  There is not enough information to answer the question.E) B) and C)
F) A) and B)

Question 4

Nastech Pharmaceuticals announced it has developed a nasal spray that would reduce hunger cravings. Other things the same we would expect

Accepted Answer

A)  the demand for existing shares of stock in this company to decrease, so the price would fall.
B)  the demand for existing shares of stock in this company to increase, so the price would rise.
C)  the supply of existing shares of stock in this company to decrease, so the price would fall.
D)  the supply of existing shares of stock in this company to increase, so the price would rise.E) None of the above
F) A) and D)

Question 5

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

Question 6

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) C) and D)

Question 7

Which of the following would not be a result of replacing the income tax with a consumption tax so that interest income was no longer taxed?

Accepted Answer

A)  The interest rate would decrease.
B)  Investment would decrease.
C)  The standard of living would eventually rise.
D)  The supply of loanable funds would shift right.E) A) and B)
F) All of the above

Question 8

Suppose that you are a broker and people tell you the following about themselves. What sort of bond would you recommend to each? Defend your choices.
a."I am in a high federal income tax bracket and I don't want to take very much risk."
b."I want a high return and I am willing to take a lot of risk to get it."
c."I want a decent return and I have enough deductions that I don't value tax breaks highly."

Accepted Answer

a.A municipal bond. Municipal bonds gene...

Question 9

What would happen in the market for loanable funds if the government were to decrease the tax rate on interest income?

Accepted Answer

A)  The supply of loanable funds would shift rightward and investment would increase.
B)  The supply of loanable funds would shift leftward and investment would decrease.
C)  The demand for loanable funds would shift rightward and investment would increase.
D)  The demand for loanable funds would shift leftward and investment would decrease.E) None of the above
F) A) and B)

Question 10

Scenario 13-1. Assume the following information for an imaginary, closed economy.   GDP =$120,000; consumption =$70,000; private savng =$9,000;  national saving =$12,000\begin{array} { l } 	ext { GDP } = \$ 120,000 ; 	ext { consumption } = \$ 70,000 ; 	ext { private savng } = \$ 9,000 	ext {; } \	ext { national saving } = \$ 12,000\end{array} GDP =$120,000; consumption =$70,000; private savng =$9,000;  national saving =$12,000​ 
-Refer to Scenario 13-1. This economy's government is running a

Accepted Answer

A)  budget surplus of $3,000.
B)  budget surplus of $6,000.
C)  budget deficit of $3,000.
D)  budget deficit of $6,000. E) All of the above
F) A) and B)

Question 11

If Congress instituted an investment tax credit

Accepted Answer

A)  it would make buying bonds more desirable, so the demand for loanable funds would shift.
B)  it would make buying capital goods more desirable, so the demand for loanable funds would shift.
C)  it would make buying bonds more desirable, so the supply of loanable funds would shift.
D)  it would make buying capital goods more desirable, so the supply of loanable funds would shift.E) B) and D)
F) A) and B)

Question 12

In the national income accounting identity showing the equality between national saving and investment, what are the algebraic expressions for private saving and public saving?

Accepted Answer

Private saving is Y ...

Question 13

Net exports must equal zero for any economy

Accepted Answer

A)  that is closed.
B)  for which Y = C + I + G.
C)  for which S = Y - C - G.
D)  All of the above are correct.E) A) and B)
F) B) and D)

Question 14

Which of the following bond buyers did not buy the bond that best met his or her objective?

Accepted Answer

A)  Jackie wanted a bond with a high interest rate and was willing to take a lot of risk. She purchased a junk bond.
B)  Andrew wanted a bond that would allow him to legally avoid paying federal income taxes. He purchased a municipal bond.
C)  Suzy wanted to purchase a bond whose seller was unlikely to default. She purchased a bond that Standards and Poor's rated a low credit risk.
D)  Cecilia held long-term bonds rather than short-term bonds to avoid risk.E) A) and B)
F) None of the above

Question 15

When the government goes from running a balanced budget to running a budget surplus,

Accepted Answer

A)  national saving decreases, the interest rate rises, and the economy's long-run growth rate is likely to decrease.
B)  national saving increases, the interest rate falls, and the economy's long-run growth rate is likely to decrease.
C)  national saving decreases, the interest rate rises, and the economy's long-run growth rate is likely to increase.
D)  national saving increases, the interest rate falls, and the economy's long-run growth rate is likely to increase.E) A) and D)
F) None of the above

Question 16

A checking deposit functions as

Accepted Answer

A)  a medium of exchange and as a store of value.
B)  a medium of exchange, but not as a store of value.
C)  a store of value, but not as a medium of exchange.
D)  neither a medium of exchange nor as a store of value.E) All of the above
F) A) and B)

Question 17

Table 13-1
   Stack  Sym  Yld % P/E  Val 100s  Hi  Lo  Clase  Net Che.  GenMills  GIS 2.5351375844.343.543.97−0.63 Gillette  G 2.2313042831.129.7300.17 Graca  GGG 1.21670524.223.123.95−0.53 Hershey  HSY 2.138541863.461.762.450.72\begin{array} { | l | l | l | l | l | l | l | l | l } \hline 	ext { Stack } & 	ext { Sym } & 	ext { Yld } \% & 	ext { P/E } & 	ext { Val 100s } & 	ext { Hi } & 	ext { Lo } & 	ext { Clase } & 	ext { Net Che. } \\hline 	ext { GenMills } & 	ext { GIS } & 2.5 & 35 & 13758 & 44.3 & 43.5 & 43.97 & - 0 .63 \\hline 	ext { Gillette } & 	ext { G } & 2.2 & 31 & 30428 & 31.1 & 29.7 & 30 & 0 .17 \\hline 	ext { Graca } & 	ext { GGG } & 1.2 & 16 & 705 & 24.2 & 23.1 & 23.95 & - 0 .53 \\hline 	ext { Hershey } & 	ext { HSY } & 2.1 & 38 & 5418 & 63.4 & 61.7 & 62.45 & 0 .72 \\hline\end{array} Stack  GenMills  Gillette  Graca  Hershey ​ Sym  GIS  G  GGG  HSY ​ Yld %2.52.21.22.1​ P/E 35311638​ Val 100s 13758304287055418​ Hi 44.331.124.263.4​ Lo 43.529.723.161.7​ Clase 43.973023.9562.45​ Net Che. −0.630.17−0.530.72​​ 
-Refer to Table 13-1. In dollar terms, which company paid the highest dividend per share?

Accepted Answer

A)  GenMills
B)  Gillette
C)  Graco
D)  Hershey E) All of the above
F) A) and B)

Question 18

Norberto is opening a bicycle shop, and his monthly expenditures to get the shop up and running exceed his monthly income. Norberto is best described as a

Accepted Answer

A)  saver or as a supplier of funds.
B)  saver or as a demander of funds.
C)  borrower or as a supplier of funds.
D)  borrower or as a demander of funds.E) A) and B)
F) B) and C)

Question 19

Over-the-Rhine Cheese Corporation had a P/E ratio of 20, retained earnings of $1.70 per share and a dividend of $0.80. What was its dividend yield?

Accepted Answer

A)  1.25%
B)  1.60%
C)  3.33%
D)  7.50%E) A) and D)
F) None of the above

Question 20

Draw and label a graph showing equilibrium in the market for loanable funds.

Accepted Answer

Market for...

Exam 13: Saving, Investment, and the Financial System

Correct Answer
verified
a.A municipal bond. Municipal bonds gene...
View Answer

Which of the following bond buyers did not buy the bond that best met his or her objective?

Correct Answer
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Correct Answer
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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

An increase in the budget deficit would cause a

Correct Answer
verified

If Congress instituted an investment tax credit

Correct Answer
verified

A checking deposit functions as

Correct Answer
verified

Correct Answer
verified

Which of the following statements is correct?

Correct Answer
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Correct Answer
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When the government goes from running a balanced budget to running a budget surplus,

Correct Answer
verified

Over-the-Rhine Cheese Corporation had a P/E ratio of 20, retained earnings of $1.70 per share and a dividend of $0.80. What was its dividend yield?

Correct Answer
verified

Norberto is opening a bicycle shop, and his monthly expenditures to get the shop up and running exceed his monthly income. Norberto is best described as a

Correct Answer
verified

What would happen in the market for loanable funds if the government were to decrease the tax rate on interest income?

Correct Answer
verified

In the national income accounting identity showing the equality between national saving and investment, what are the algebraic expressions for private saving and public saving?

Correct Answer
verified
Private saving is Y ...
View Answer

Which of the following would not be a result of replacing the income tax with a consumption tax so that interest income was no longer taxed?

Correct Answer
verified

Nastech Pharmaceuticals announced it has developed a nasal spray that would reduce hunger cravings. Other things the same we would expect

Correct Answer
verified

In a small closed economy investment is $50 billion and private saving is $55 billion. What are public saving and national saving?

Correct Answer
verified

Net exports must equal zero for any economy

Correct Answer
verified

Draw and label a graph showing equilibrium in the market for loanable funds.

Correct Answer
verified
Market for...
View Answer

Exam 13: Saving, Investment, and the Financial System

Correct Answerverifieda.A municipal bond. Municipal bonds gene...View AnswerShow Answer

Which of the following bond buyers did not buy the bond that best met his or her objective?

Correct AnswerverifiedShow Answer

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

An increase in the budget deficit would cause a

Correct AnswerverifiedShow Answer

If Congress instituted an investment tax credit

Correct AnswerverifiedShow Answer

A checking deposit functions as

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When the government goes from running a balanced budget to running a budget surplus,

Correct AnswerverifiedShow Answer

Over-the-Rhine Cheese Corporation had a P/E ratio of 20, retained earnings of $1.70 per share and a dividend of $0.80. What was its dividend yield?

Correct AnswerverifiedShow Answer

Norberto is opening a bicycle shop, and his monthly expenditures to get the shop up and running exceed his monthly income. Norberto is best described as a

Correct AnswerverifiedShow Answer

What would happen in the market for loanable funds if the government were to decrease the tax rate on interest income?

Correct AnswerverifiedShow Answer

In the national income accounting identity showing the equality between national saving and investment, what are the algebraic expressions for private saving and public saving?

Correct AnswerverifiedPrivate saving is Y ...View AnswerShow Answer

Which of the following would not be a result of replacing the income tax with a consumption tax so that interest income was no longer taxed?

Correct AnswerverifiedShow Answer

Nastech Pharmaceuticals announced it has developed a nasal spray that would reduce hunger cravings. Other things the same we would expect

Correct AnswerverifiedShow Answer

In a small closed economy investment is $50 billion and private saving is $55 billion. What are public saving and national saving?

Correct AnswerverifiedShow Answer

Net exports must equal zero for any economy

Correct AnswerverifiedShow Answer

Draw and label a graph showing equilibrium in the market for loanable funds.

Correct AnswerverifiedMarket for...View AnswerShow Answer

Correct Answer
verified
a.A municipal bond. Municipal bonds gene...
View Answer

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Private saving is Y ...
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Market for...
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