Question 1

In a closed economy, if Y and T remained the same, but G rose, and C fell but by less than the rise in G, what would happen to public and national saving?

Accepted Answer

A)   public and national saving would rise
B)   public and national saving would fall
C)   public saving would rise and national saving would fall
D)   public saving would fall and national saving would riseE) None of the above
F) All of the above

Question 2

Scenario 8-2. Assume the following information for an imaginary, closed economy.
GDP = $200,000; consumption = $120,000;
government purchases = $35,000; and taxes = $25,000.
-Refer to Scenario 8-2. For this economy, private saving is equal to

Accepted Answer

A)   $40,000.
B)   $50,000.
C)   $55,000.
D)   $60,000.E) B) and C)
F) A) and B)

Question 3

Figure 8-4. On the horizontal axis of the graph, L represents the quantity of loanable funds in billions of dollars.
 1. B)  D2. C)  between D1and D2. D)  to the Left of D2. " class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 8-4. Regard the position of the Supply curve as fixed, as on the graph. If the real interest rate is 4 percent, the inflation rate is 2 percent, and the market for loanable funds is in equilibrium, then the position of the demand-for-loanable-funds curve must be

Accepted Answer

A)   D1.
B)   D2.
C)   between D1and D2.
D)   to the Left of D2.E) A) and B)
F) A) and C)

Question 4

Consider the expressions T - G and Y - T - C. Which of the following statements is correct?

Accepted Answer

A)   Each one of these is equal to national saving.
B)   Each one of these is equal to public saving.
C)   The first of these is private saving; the second one is public saving.
D)   The first of these is public saving; the second one is private saving.E) B) and C)
F) All of the above

Question 5

Suppose Sarah Lee Corporation stock has a P/E ratio of 8. This P/E ratio is relatively

Accepted Answer

A)   low, indicating that buyers may expect earnings to rise.
B)   low, indicating that buyers may expect earnings to fall.
C)   high, indicating that buyers may expect earnings to rise.
D)   high, indicating that buyers may expect earnings to fall.E) A) and B)
F) C) and D)

Question 6

On which of these bonds is the prospect of default most likely?

Accepted Answer

A)   a junk bond
B)   a municipal bond
C)   a U.S. government bond
D)   a corporate bond issued by Proctor & Gamble CorporationE) A) and D)
F) A) and C)

Question 7

Which of the following is included in the demand for loanable funds?

Accepted Answer

A)   investment and government borrowing
B)   investment but not government borrowing
C)   government borrowing but not investment
D)   neither government borrowing nor investmentE) B) and C)
F) All of the above

Question 8

Which of the following statements is correct?

Accepted Answer

A)   A corporation receives a monetary payment every time its shares of stock are traded by stockholders on organized stock exchanges.
B)   When a corporation sells bonds as a means of raising funds it is engaging in debt finance.
C)   A share of stock is an IOU.
D)   The two most important financial markets in the economy are the stock market and financial intermediaries.E) All of the above
F) C) and D)

Question 9

If an economy is closed and if it has no government, then

Accepted Answer

A)   national saving = 0.
B)   national saving = private saving.
C)   public saving = investment.
D)   gross domestic product = consumption.E) All of the above
F) A) and B)

Question 10

Which of the following is not correct?

Accepted Answer

A)   Gross domestic product is both total income in an economy and total expenditures on the economy's output of goods and services.
B)   In a closed economy net exports are zero.
C)   National saving is the sum of private saving and public saving.
D)   Purchases of capital goods are excluded from GDP.E) A) and D)
F) C) and D)

Question 11

If Japan goes from a small budget deficit to a large budget deficit, it will reduce

Accepted Answer

A)   private saving and so shift the supply of loanable funds left.
B)   investment and so shift the demand for loanable funds left.
C)   public saving and so shift the supply of loanable funds left.
D)   None of the above is correct.E) A) and B)
F) A) and C)

Question 12

Suppose a country has a consumption tax that is similar to a state sales tax. If its government were to eliminate the consumption tax and replace it with an income tax that includes an income tax on interest from savings, what would happen?

Accepted Answer

A)   There would be no change in the interest rate or saving.
B)   The interest rate would decrease and saving would increase.
C)   The interest rate would increase and saving would decrease.
D)   None of the above is correct.E) C) and D)
F) A) and D)

Question 13

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

Accepted Answer

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

Question 14

Interest rates fall and investment falls. Which of the following could explain these changes?

Accepted Answer

A)   The government goes from a surplus to a deficit.
B)   The government repeals an investment tax credit.
C)   The government replaces a consumption tax with an income tax.
D)   None of the above is correct.E) A) and B)
F) A) and C)

Question 15

Which of the following is both a store of value and a common medium of exchange?

Accepted Answer

A)   corporate bonds
B)   mutual funds
C)   checking account balances
D)   All of the above are correct.E) All of the above
F) None of the above

Question 16

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 gen...

Question 17

Figure 8-3. The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves.
 
-Refer to Figure 8-3. Which of the following movements shows the effects of a new law that makes more people than before eligible for Individual Retirement Accounts?

Accepted Answer

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

Question 18

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

Question 19

Which of the following is not always correct for a closed economy?

Accepted Answer

A)   National saving equals private saving plus public saving.
B)   Net exports equal zero.
C)   Real GDP measures both income and expenditures.
D)   Private saving equals investment.E) B) and D)
F) B) and C)

Question 20

Which of the following expressions must be equal to national saving for a closed economy?

Accepted Answer

A)   Y - I - G - NX
B)   Y - C - G
C)   Y - I - C
D)   G + C - YE) C) and D)
F) B) and C)

Exam 8: Saving, Investment, and the Financial System

Which of the following statements is correct?

Correct Answer
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Interest rates fall and investment falls. Which of the following could explain these changes?

Correct Answer
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Which of the following is included in the demand for loanable funds?

Correct Answer
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If an economy is closed and if it has no government, then

Correct Answer
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Correct Answer
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a.
A municipal bond. Municipal bonds gen...
View Answer

Which of the following is both a store of value and a common medium of exchange?

Correct Answer
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Which of the following expressions must be equal to national saving for a closed economy?

Correct Answer
verified

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

Correct Answer
verified

Figure 8-3. The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves. -Refer to Figure 8-3. Which of the following movements shows the effects of a new law that makes more people than before eligible for Individual Retirement Accounts?

Correct Answer
verified

Correct Answer
verified

Suppose a country has a consumption tax that is similar to a state sales tax. If its government were to eliminate the consumption tax and replace it with an income tax that includes an income tax on interest from savings, what would happen?

Correct Answer
verified

On which of these bonds is the prospect of default most likely?

Correct Answer
verified

In a closed economy, if Y and T remained the same, but G rose, and C fell but by less than the rise in G, what would happen to public and national saving?

Correct Answer
verified

Consider the expressions T - G and Y - T - C. Which of the following statements is correct?

Correct Answer
verified

Suppose Sarah Lee Corporation stock has a P/E ratio of 8. This P/E ratio is relatively

Correct Answer
verified

If Japan goes from a small budget deficit to a large budget deficit, it will reduce

Correct Answer
verified

Which of the following is not correct?

Correct Answer
verified

Which of the following is not always correct for a closed economy?

Correct Answer
verified

Scenario 8-2. Assume the following information for an imaginary, closed economy. GDP = $200,000; consumption = $120,000; government purchases = $35,000; and taxes = $25,000. -Refer to Scenario 8-2. For this economy, private saving is equal to

Correct Answer
verified

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

Correct Answer
verified

Exam 8: Saving, Investment, and the Financial System

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Interest rates fall and investment falls. Which of the following could explain these changes?

Correct AnswerverifiedShow Answer

Which of the following is included in the demand for loanable funds?

Correct AnswerverifiedShow Answer

If an economy is closed and if it has no government, then

Correct AnswerverifiedShow Answer

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

Which of the following is both a store of value and a common medium of exchange?

Correct AnswerverifiedShow Answer

Which of the following expressions must be equal to national saving for a closed economy?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Figure 8-3. The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves. -Refer to Figure 8-3. Which of the following movements shows the effects of a new law that makes more people than before eligible for Individual Retirement Accounts?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Suppose a country has a consumption tax that is similar to a state sales tax. If its government were to eliminate the consumption tax and replace it with an income tax that includes an income tax on interest from savings, what would happen?

Correct AnswerverifiedShow Answer

On which of these bonds is the prospect of default most likely?

Correct AnswerverifiedShow Answer

In a closed economy, if Y and T remained the same, but G rose, and C fell but by less than the rise in G, what would happen to public and national saving?

Correct AnswerverifiedShow Answer

Consider the expressions T - G and Y - T - C. Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Suppose Sarah Lee Corporation stock has a P/E ratio of 8. This P/E ratio is relatively

Correct AnswerverifiedShow Answer

If Japan goes from a small budget deficit to a large budget deficit, it will reduce

Correct AnswerverifiedShow Answer

Which of the following is not correct?

Correct AnswerverifiedShow Answer

Which of the following is not always correct for a closed economy?

Correct AnswerverifiedShow Answer

Scenario 8-2. Assume the following information for an imaginary, closed economy. GDP = $200,000; consumption = $120,000; government purchases = $35,000; and taxes = $25,000. -Refer to Scenario 8-2. For this economy, private saving is equal to

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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a.
A municipal bond. Municipal bonds gen...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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