Question 1

If the tax rate fell, holding municipal bonds would be less desirable so the interest rates on them would fall.

Accepted Answer

A) True 
 B)False

Question 2

In the language of macroeconomics, investment refers to

Accepted Answer

A)  saving.
B)  the purchase of new capital.
C)  the purchase of stocks, bonds, or mutual funds.
D)  All of the above are correct.

Question 3

If the quantity of loanable funds demanded exceeds the quantity of loanable funds supplied,

Accepted Answer

A)  there is a surplus and the interest rate is above the equilibrium level.
B)  there is a surplus and the interest rate is below the equilibrium level.
C)  there is a shortage and the interest rate is above the equilibrium level.
D)  there is a shortage and the interest rate is below the equilibrium level.

Question 4

If there is a shortage of loanable funds, then

Accepted Answer

A)  the quantity of loanable funds demanded is greater than the quantity of loanable funds supplied and the interest rate is above equilibrium.
B)  the quantity of loanable funds demanded is greater than the quantity of loanable funds supplied and the interest rate is below equilibrium.
C)  the quantity of loanable funds supplied is greater than the quantity of loanable funds demanded and the interest rate is above equilibrium.
D)  the quantity of loanable funds supplied is greater than the quantity of loanable funds demanded and the interest rate is below equilibrium.

Question 5

The term loanable funds refers to all income that is not used for consumption.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following restrictions implies that private saving and investment are equal for a closed economy?

Accepted Answer

A)  Consumption and private saving are equal.
B)  The economy's government is running neither a surplus nor a deficit.
C)  Private saving and public saving are both zero.
D)  No restriction is necessary; private saving and investment are equal for all closed economies.

Question 7

If you were to start a business delivering documents, you might need to purchase cell phones, bicycles, desks, and chairs.

Accepted Answer

A)  These purchases are called capital investment. If you raise the funds to purchase them from others you are a saver.
B)  These purchases are called capital investment. If you raise the funds to purchase them from others you are a borrower.
C)  These purchases are called consumption. If you raise the funds to purchase them from others you are a saver.
D)  These purchases are called consumption. If you raise the funds to purchase them from others you are a borrower.

Question 8

If a share of stock in Dell sells for $70, the retained earnings per share are $5, and the dividend per share is $2, then the price-earnings ratio is 10.

Accepted Answer

A) True 
 B)False

Question 9

A perpetuity is

Accepted Answer

A)  a financial intermediary that has existed throughout recorded history.
B)  an instrument of equity finance.
C)  a stock that pays dividends forever.
D)  a bond that pays interest forever.

Question 10

Which of the following would necessarily increase the equilibrium interest rate?

Accepted Answer

A)  The demand for and the supply of loanable funds shift right.
B)  The demand for and the supply of loanable funds shift left.
C)  The demand for loanable funds shifts right and the supply of loanable funds shifts left.
D)  The demand for loanable funds shifts left and the supply of loanable funds shifts right.

Question 11

In a closed economy, if Y, C, and T remained the same, an increase in G would reduce

Accepted Answer

A)  private saving and public saving.
B)  private saving but not public saving.
C)  public saving but not private saving.
D)  neither private nor public saving.

Question 12

Joan uses some of her income to buy mutual fund shares. A macroeconomist refers to Joan's purchase as investment.

Accepted Answer

A) True 
 B)False

Question 13

The nominal interest rate is the

Accepted Answer

A)  interest rate corrected for inflation.
B)  interest rate as usually reported by banks.
C)  real rate of return to the lender.
D)  real cost of borrowing to the borrower.

Question 14

If the supply for loanable funds shifts to the left, then the equilibrium interest rate

Accepted Answer

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

Question 15

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.

Question 16

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.

Question 17

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. For this economy, taxes amount to

Accepted Answer

A)  $28,000.
B)  $38,000.
C)  $41,000.
D)  $44,000.

Question 18

Which of the following could explain an increase in the interest rate and the equilibrium quantity of loanable funds?

Accepted Answer

A)  The demand for loanable funds shifted rightward.
B)  The demand for loanable funds shifted leftward.
C)  The supply of loanable funds shifted rightward.
D)  The supply of loanable funds shifted leftward.

Question 19

Which of the following is not a characteristic of a bond?

Accepted Answer

A)  its tax treatment
B)  its credit risk
C)  its term
D)  its dividend yield

Question 20

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.

Exam 13: Saving, Investment, and the Financial System

Other things the same, when the interest rate rises,

Correct Answer
verified

If you were to start a business delivering documents, you might need to purchase cell phones, bicycles, desks, and chairs.

Correct Answer
verified

If there is a shortage of loanable funds, then

Correct Answer
verified

If a share of stock in Dell sells for $70, the retained earnings per share are $5, and the dividend per share is $2, then the price-earnings ratio is 10.

Correct Answer
verified

If the tax rate fell, holding municipal bonds would be less desirable so the interest rates on them would fall.

Correct Answer
verified

Joan uses some of her income to buy mutual fund shares. A macroeconomist refers to Joan's purchase as investment.

Correct Answer
verified

Which of the following is not a characteristic of a bond?

Correct Answer
verified

The nominal interest rate is the

Correct Answer
verified

Which of the following restrictions implies that private saving and investment are equal for a closed economy?

Correct Answer
verified

Which of the following would necessarily increase the equilibrium interest rate?

Correct Answer
verified

If the supply for loanable funds shifts to the left, then the equilibrium interest rate

Correct Answer
verified

A perpetuity is

Correct Answer
verified

In the language of macroeconomics, investment refers to

Correct Answer
verified

If the quantity of loanable funds demanded exceeds the quantity of loanable funds supplied,

Correct Answer
verified

In a closed economy, if Y, C, and T remained the same, an increase in G would reduce

Correct Answer
verified

Which of the following could explain an increase in the interest rate and the equilibrium quantity of loanable funds?

Correct Answer
verified

The term loanable funds refers to all income that is not used for consumption.

Correct Answer
verified

Correct Answer
verified

When the government runs a budget deficit,

Correct Answer
verified

Crowding out occurs when investment declines because

Correct Answer
verified

Exam 13: Saving, Investment, and the Financial System

Other things the same, when the interest rate rises,

Correct AnswerverifiedShow Answer

If you were to start a business delivering documents, you might need to purchase cell phones, bicycles, desks, and chairs.

Correct AnswerverifiedShow Answer

If there is a shortage of loanable funds, then

Correct AnswerverifiedShow Answer

If a share of stock in Dell sells for $70, the retained earnings per share are $5, and the dividend per share is $2, then the price-earnings ratio is 10.

Correct AnswerverifiedShow Answer

If the tax rate fell, holding municipal bonds would be less desirable so the interest rates on them would fall.

Correct AnswerverifiedShow Answer

Joan uses some of her income to buy mutual fund shares. A macroeconomist refers to Joan's purchase as investment.

Correct AnswerverifiedShow Answer

Which of the following is not a characteristic of a bond?

Correct AnswerverifiedShow Answer

The nominal interest rate is the

Correct AnswerverifiedShow Answer

Which of the following restrictions implies that private saving and investment are equal for a closed economy?

Correct AnswerverifiedShow Answer

Which of the following would necessarily increase the equilibrium interest rate?

Correct AnswerverifiedShow Answer

If the supply for loanable funds shifts to the left, then the equilibrium interest rate

Correct AnswerverifiedShow Answer

A perpetuity is

Correct AnswerverifiedShow Answer

In the language of macroeconomics, investment refers to

Correct AnswerverifiedShow Answer

If the quantity of loanable funds demanded exceeds the quantity of loanable funds supplied,

Correct AnswerverifiedShow Answer

In a closed economy, if Y, C, and T remained the same, an increase in G would reduce

Correct AnswerverifiedShow Answer

Which of the following could explain an increase in the interest rate and the equilibrium quantity of loanable funds?

Correct AnswerverifiedShow Answer

The term loanable funds refers to all income that is not used for consumption.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When the government runs a budget deficit,

Correct AnswerverifiedShow Answer

Crowding out occurs when investment declines because

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