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Index funds


A) typically have a higher rate of return and higher costs than managed mutual funds.
B) typically have a higher rate of return and lower costs than managed mutual funds.
C) typically have a lower rate of return and higher costs than managed mutual funds.
D) typically have a lower rate of return and lower costs than managed mutual funds.

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

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


A) a bond issued by a state with a very good credit rating
B) a bond issued by the U.S.government
C) a bond issued by a fairly new company doing genetic research
D) a bond issued by Nabisco

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

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


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) B) and D)

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A national chain of grocery stores wants to finance the construction of several new stores.The firm has limited internal funds,so it likely will


A) demand the required funds by buying bonds.
B) demand the required funds by selling bonds.
C) supply the required funds by buying bonds.
D) supply the required funds by selling bonds.

E) C) and D)
F) None of the above

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Which of the following statements is correct?


A) NASDAQ is an important stock exchange in the United States.
B) The Standard & Poor's 500 Index and the New York Stock Exchange are two examples of stock indexes.
C) The most significant influence on the demand for a corporation's stock is the number of shares of the stock that the corporation has issued.
D) All of the above are correct.

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

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Other things the same,when the interest rate rises,


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) None of the above
F) C) and D)

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A corporation's earnings are the amount of revenue it receives for the sale of its products


A) minus its cost of production as measured by its accountants.Earnings must be paid out as dividends.
B) minus its cost of production as measured by its accountants.Earnings may be paid out as dividends or retained by the corporation.
C) minus its direct and indirect costs as measured by its economists.Earnings must be paid out as dividends.
D) minus its direct and indirect cost as measure by its economists.Earnings may be paid out as dividends or retained by the corporation.

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

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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."

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a.Presumably,when this happens,unless ev...

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


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

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Which of the following statements is correct?


A) Stocks,bonds,and deposits are all similar in that each provides a common medium of exchange.
B) Most buyers of stocks and bonds prefer those issued by large and familiar companies.
C) Banks charge borrowers a slightly lower interest rate than they pay to depositors.
D) None of the above is correct.

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

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Other things the same,a government budget deficit


A) reduces public saving,but not national saving.
B) reduces national saving,but not public saving.
C) reduces both public and national saving.
D) reduces neither public saving nor national saving.

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

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Other things the same,if the government increases transfer payments,then


A) both the interest rate and the equilibrium quantity of loanable funds fall.
B) both the interest rate and the equilibrium quantity of loanable funds rise.
C) the interest rate rises and the equilibrium quantity of loanable funds falls.
D) the interest rate falls and the equilibrium quantity of loanable funds rises.

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

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Which of the following is not a nonsensical headline?


A) British perpetuities about to mature.
B) Disney issues new bonds with term of 7 percent.
C) Corporate bonds currently pay higher interest rates than government bonds.
D) Standard and Poor's judges new junk bond to have very low credit risk.

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

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Figure 13-3.The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves. Figure 13-3.The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves.   -Refer to Figure 13-3.Which of the following movements shows the effects of the government going from a budget deficit to a budget surplus? A)  a movement from Point A to Point B B)  a movement from Point B to Point A C)  a movement from Point A to Point F D)  a movement from Point C to Point B -Refer to Figure 13-3.Which of the following movements shows the effects of the government going from a budget deficit to a budget surplus?


A) a movement from Point A to Point B
B) a movement from Point B to Point A
C) a movement from Point A to Point F
D) a movement from Point C to Point B

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

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Which of the following is an example of financial intermediation?


A) John buys shares of stock issued by a fast food company.
B) A foreign government buys bonds issued by the U.S.Treasury.
C) Susan makes a deposit at a bank and the bank uses this money to make an auto loan to Ferguson.
D) None of the above is correct.

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

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According to the definitions of national saving and public saving,if Y,C,and G remained the same,an increase in taxes would


A) raise national saving and public saving.
B) raise national saving and raise public saving.
C) leave national saving and public saving unchanged.
D) leave national saving unchanged and raise public saving.

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

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Which advantage(s) do mutual funds claim to provide?


A) diversification and access to the skills of professional money managers
B) diversification but not access to the skills of professional money managers
C) access to the skills of professional money managers but not diversification
D) neither diversification nor access to the skills of professional money managers.

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

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Y = C + I + G + NX is an identity because


A) each symbol identifies a macroeconomic variable.
B) the right-hand and left-hand sides are equal when an equilibrium is reached.
C) the equality holds due to the way the variables are defined.
D) None of the above is correct.

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

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When a firm wants to borrow directly from the public to finance the purchase of new equipment,it does so by selling bonds.

A) True
B) False

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