Question 1

In national income accounting,we use which of the following pairs of terms interchangeably?

Accepted Answer

A)   "investment" and "private saving"
B)   "investment" and "purchases of stocks and bonds"
C)   "saving" and "national saving"
D)   "public saving" and "government tax revenue minus government spending"E) All of the above
F) B) and C)

Question 2

Other things the same,the higher the rate of saving and investment in a country,the higher will be the standard of living.

Accepted Answer

A) True 
 B)False

Question 3

When economists refer to investment,they mean the purchasing of stocks and bonds and other types of saving.

Accepted Answer

A) True 
 B)False

Question 4

Stock in Tasty Greens Restaurants is selling at $80 per share with 1 million shares outstanding.Last year,Tasty Greens earned $5 million,of which it retained $1 million for future investments.The dividend yield on the stock is

Accepted Answer

A)   1 percent.
B)   2 percent.
C)   4 percent.
D)   5 percent.E) A) and D)
F) A) and C)

Question 5

Which of the following would likely make the interest rate on a bond higher than otherwise?

Accepted Answer

A)   both high credit risk and a long term
B)   high credit risk but not a long term
C)   a long term but not a high credit risk
D)   neither high credit risk nor a long termE) A) and B)
F) A) and D)

Question 6

If people become less optimistic about the future earnings of Hyde Park Jazz Studio,then the price of the company's stock will fall.

Accepted Answer

A) True 
 B)False

Question 7

If Congress reduced the tax rate on interest income,investment

Accepted Answer

A)   would increase and saving would decrease.
B)   would decrease and saving would increase.
C)   and saving would increase.
D)   and saving would decrease.E) A) and C)
F) A) and B)

Question 8

If there is a surplus 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) All of the above
F) A) and C)

Question 9

Compared to stocks,bonds offer the holder

Accepted Answer

A)   lower risk and lower potential return.
B)   lower risk and higher potential return.
C)   higher risk and lower potential return.
D)   higher risk and higher potential return.E) None of the above
F) All of the above

Question 10

Suppose government expenditures on goods and services and net taxes both decrease,and expenditures fall by more than net taxes.The effects of these changes on the budget deficit cause

Accepted Answer

A)   both the equilibrium interest rate and the equilibrium quantity of loanable funds to fall.
B)   both the equilibrium interest rate and the equilibrium quantity of loanable funds to rise.
C)   the equilibrium interest rate to rise and the equilibrium quantity of loanable funds to fall.
D)   the equilibrium interest rate to fall and the equilibrium quantity of loanable funds to rise.E) A) and B)
F) A) and C)

Question 11

An increase in the demand for loanable funds increases the equilibrium interest rate and decreases the equilibrium level of saving.

Accepted Answer

A) True 
 B)False

Question 12

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

Accepted Answer

A)   Mia wanted a bond with a high interest rate and was willing to take a lot of risk.She purchased a junk bond.
B)   Anna wanted a bond that would let her best avoid federal income taxes.She purchased a municipal bond.
C)   Bill wanted to purchase a bond whose seller was unlikely to default.He purchased a bond that Standards and Poor's rated a low credit risk.
D)   Toby held long-term bonds rather than short-term ones to avoid risk.E) C) and D)
F) A) and D)

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

In a closed economy,what does (T - G) represent?

Accepted Answer

A)   national saving
B)   investment
C)   private saving
D)   public savingE) All of the above
F) B) and D)

Question 15

Which of the following is correct?

Accepted Answer

A)   In the national income accounts,investment and private saving refer to the same thing.
B)   In a closed economy if national saving is greater than zero,then everyone must be saving.
C)   The financial system channels funds from savers to borrowers.
D)   People whose consumption exceeds their income are savers.E) All of the above
F) C) and D)

Question 16

Historically,the typical price-earnings ratio for stocks is about

Accepted Answer

A)   3
B)   8
C)   15
D)   26E) B) and C)
F) C) and D)

Question 17

A change in the tax laws that increases the supply of loanable funds will have a bigger effect on investment when

Accepted Answer

A)   the demand for loanable funds is more elastic and the supply of loanable funds is more inelastic.
B)   the demand for loanable funds is more inelastic and the supply of loanable funds is more elastic.
C)   both the demand for and supply of loanable funds are more elastic.
D)   both the demand for and supply of loanable funds are more inelastic.E) A) and C)
F) C) and D)

Question 18

Crowding out occurs when investment declines because

Accepted Answer

A)   a budget deficit makes interest rates rise.
B)   a budget deficit makes interest rates fall.
C)   a budget surplus makes interest rates rise.
D)   a budget surplus makes interest rates fall.E) B) and C)
F) All of the above

Question 19

To state that national saving is equal to investment,for a closed economy,is to state an accounting identity.

Accepted Answer

A) True 
 B)False

Question 20

Suppose government expenditures on goods and services increase,transfers are unchanged,and taxes rise by less than the increase in expenditures.These changes in the government's budget cause

Accepted Answer

A)   both the equilibrium interest rate and the equilibrium quantity of loanable funds to fall.
B)   both the equilibrium interest rate and the equilibrium quantity of loanable funds to rise.
C)   the equilibrium interest rate to rise and the equilibrium quantity of loanable funds to fall.
D)   the equilibrium interest rate to fall and the equilibrium quantity of loanable funds to rise.E) B) and C)
F) C) and D)

Exam 26: Saving, investment, and the Financial System

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

Correct AnswerverifiedShow Answer

Historically,the typical price-earnings ratio for stocks is about

Correct AnswerverifiedShow Answer

Suppose government expenditures on goods and services increase,transfers are unchanged,and taxes rise by less than the increase in expenditures.These changes in the government's budget cause

Correct AnswerverifiedShow Answer

Stock in Tasty Greens Restaurants is selling at $80 per share with 1 million shares outstanding.Last year,Tasty Greens earned $5 million,of which it retained $1 million for future investments.The dividend yield on the stock is

Correct AnswerverifiedShow Answer

In a closed economy,what does (T - G) represent?

Correct AnswerverifiedShow Answer

When economists refer to investment,they mean the purchasing of stocks and bonds and other types of saving.

Correct AnswerverifiedShow Answer

Suppose government expenditures on goods and services and net taxes both decrease,and expenditures fall by more than net taxes.The effects of these changes on the budget deficit cause

Correct AnswerverifiedShow Answer

If people become less optimistic about the future earnings of Hyde Park Jazz Studio,then the price of the company's stock will fall.

Correct AnswerverifiedShow Answer

Which of the following would likely make the interest rate on a bond higher than otherwise?

Correct AnswerverifiedShow Answer

To state that national saving is equal to investment,for a closed economy,is to state an accounting identity.

Correct AnswerverifiedShow Answer

An increase in the demand for loanable funds increases the equilibrium interest rate and decreases the equilibrium level of saving.

Correct AnswerverifiedShow Answer

If Congress reduced the tax rate on interest income,investment

Correct AnswerverifiedShow Answer

Compared to stocks,bonds offer the holder

Correct AnswerverifiedShow Answer

A change in the tax laws that increases the supply of loanable funds will have a bigger effect on investment when

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Other things the same,the higher the rate of saving and investment in a country,the higher will be the standard of living.

Correct AnswerverifiedShow Answer

Crowding out occurs when investment declines because

Correct AnswerverifiedShow Answer

If there is a surplus of loanable funds,then

Correct AnswerverifiedShow Answer

In national income accounting,we use which of the following pairs of terms interchangeably?

Correct AnswerverifiedShow Answer

Which of the following is correct?

Correct AnswerverifiedShow 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

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

Correct Answer
verified

Correct Answer
verified