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-Refer to the Table 8-3. Supposing equilibrium exists in the market for loanable funds, what is the quantity of funds supplied in this market? A) $2.2 trillion B) $2.5 trillion C) $2.8 trillion D) $3.1 trillion -Refer to the Table 8-3. Supposing equilibrium exists in the market for loanable funds, what is the quantity of funds supplied in this market?


A) $2.2 trillion
B) $2.5 trillion
C) $2.8 trillion
D) $3.1 trillion

E) All of the above
F) A) and D)

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Suppose the Steamhot yoga chain has revenues of $75 million, costs of $25 million, and currently has issued 20 million shares selling at $50 each. Compute the price/earnings ratio. Show your work. Is this ratio relatively high or low? What might an increase in the price/earnings ratio indicate?

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The earnings per share is ($75 million -...

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National saving is equal to Y - T - C.

A) True
B) False

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


A) 50 billion denars
B) 60 billion denars
C) 70 billion denars
D) 80 billion denars

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

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What are the basic differences between bonds and stocks?

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A bond is a certificate of indebtedness ...

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Which statement best defines a closed economy?


A) It does not trade with other economies.
B) It does not have free markets.
C) It does not allow immigration.
D) It does not have freedom of entry and exit.

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

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To make the financial markets safer, the Canadian government proposes tightening the rules for making a loan. Such rules require higher borrower creditworthiness and shorter pay-back periods. Analyze this proposal in a supply and demand for loanable funds model.

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The demand for loanable funds remains un...

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What does the slope of the supply of loanable funds curve represent?


A) the positive relation between the real interest rate and investment
B) the positive relation between the real interest rate and saving
C) the negative relation between the real interest rate and investment
D) the negative relation between the real interest rate and saving

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

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Suppose a developing country decides to institute an investment tax credit. As a result, what is most likely to happen?


A) Interest rates would rise, and investment would fall.
B) Interest rates would fall, and investment would rise.
C) Both interest rates and investment would fall.
D) Both interest rates and investment would rise.

E) C) and D)
F) B) and C)

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Bella Roma Italian Market sells common stock. What type of financing are they using?


A) They are using equity financing, and the return shareholders earn is fixed.
B) They are using equity financing, and the return shareholders earn depends on how profitable the company is.
C) They are using debt financing, and the return debt holders earn is fixed.
D) They are using debt financing, and the return debt holders earn depends on how profitable the company is.

E) All of the above
F) A) and B)

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What does a higher interest rate induce people to do?


A) save more, so the supply of loanable funds slopes upward
B) save less, so the supply of loanable funds slopes downward
C) invest more, so the supply of loanable funds slopes upward
D) invest less, so the supply of loanable funds slopes downward

E) C) and D)
F) B) and C)

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You are required to testify before Parliament concerning the effects of an increase in the government surplus. What is the best thing for you to say?


A) The debt and interest rates will rise.
B) The debt and interest rates will fall.
C) The debt will rise, and interest rates will fall.
D) The debt will fall, and interest rates will rise.

E) A) and B)
F) All of the above

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Suppose that in a closed economy GDP is equal to 18,000, taxes are equal to 1500, consumption is equal to 8800, and government expenditures are equal to 2200. What is national saving?


A) 700
B) 5500
C) 7000
D) 9200

E) A) and B)
F) B) and C)

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As a money management fee, how much do mutual funds usually charge their customers?


A) between 0.5 and 3.0 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) B) and C)
F) A) and B)

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Explain why the demand for loanable funds slopes downward and the supply of loanable funds slopes upward.

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When the interest rate rises, investment...

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Index funds are usually outperformed by mutual funds that are actively managed by professional money managers.

A) True
B) False

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-Refer to Table 8-4. Supposing the market for loanable funds is in equilibrium, what is the quantity of funds demanded? A) $10 billion B) $15 billion C) $20 billion D) $40 billion -Refer to Table 8-4. Supposing the market for loanable funds is in equilibrium, what is the quantity of funds demanded?


A) $10 billion
B) $15 billion
C) $20 billion
D) $40 billion

E) A) and B)
F) All of the above

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If the current market interest rate for loanable funds is below the equilibrium level, what is most likely to happen?


A) The quantity of loanable funds demanded will exceed the quantity of loanable funds supplied and the interest rate will rise.
B) The quantity of loanable funds supplied will exceed the quantity of loanable funds demanded and the interest rate will rise.
C) The quantity of loanable funds demanded will exceed the quantity of loanable funds supplied and the interest rate will fall.
D) The quantity of loanable funds supplied will exceed the quantity of loanable funds demanded and the interest rate will fall.

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

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The only province not currently collecting a sales tax is Alberta. What is a likely result from the recently elected government's proposal to reduce income taxes and introduce a sales tax?


A) The equilibrium interest rate and investment would both increase.
B) The supply of loanable funds would shift left
C) The standard of living would eventually rise.
D) The equilibrium interest rate would decrease and investment would increase.

E) A) and D)
F) A) and B)

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Joe's Better Bike Company has $5 million in cash, which it has accumulated from retained earnings. It was planning to use the money to build a new factory. Recently, the rate of interest has increased. How does this fact influence the company's decision?


A) The increase in the rate of interest should not influence the decision to build the factory because Joe's Better Bike Company doesn't have to borrow any money.
B) The increase in the rate of interest should not influence the decision to build the factory because its shareholders are expecting a new factory.
C) The increase in the rate of interest should make it more likely that Joe's Better Bike Company will build the factory because a higher interest rate will make the factory more valuable.
D) The increase in the rate of interest should make it less likely that Joe's Better Bike Company will build the factory because the opportunity cost of the $5 million is now higher.

E) A) and B)
F) B) and D)

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