Question 1

What is a bond buyer promised when she buys a bond?

Accepted Answer

The answer of What is a bond buyer promised when...

Question 2

Which of the following would necessarily create a surplus at the original equilibrium interest rate in the loanable funds market?

Accepted Answer

A)   an increase in the supply of or a decrease in the demand for loanable funds
B)   an increase in the supply of or an increase in the demand for loanable funds
C)   a decrease in the supply of or a decrease in the demand for loanable funds
D)   a decrease in the supply of or an increase in the demand for loanable fundsE) B) and C)
F) A) and B)

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

Question 4

Which of the following events could explain an increase in interest rates together with a decrease in investment?

Accepted Answer

A)   The government budget went from surplus to deficit.
B)   The government instituted an investment tax credit.
C)   The government reduced the tax rate on savings.
D)   None of the above is correct.E) A) and D)
F) A) and B)

Question 5

If the nominal interest rate is 7 percent and the real interest rate is 2 percent,then what is the inflation rate?

Accepted Answer

A)   9.0 percent
B)   5 percent
C)   3.5 percent
D)   None of the above is correct.E) C) and D)
F) A) and B)

Question 6

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

Question 7

Lenders sell bonds and borrowers buy them.

Accepted Answer

A) True 
 B)False

Question 8

The slope of the supply of loanable funds curve represents the

Accepted Answer

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

Question 9

In a closed economy,national saving is

Accepted Answer

A)   usually greater than investment.
B)   equal to investment.
C)   usually less than investment because of the leakage of taxes.
D)   always less than investment.E) A) and B)
F) A) and C)

Question 10

The supply of loanable funds slopes

Accepted Answer

A)   upward because an increase in the interest rate induces people to save more.
B)   downward because an increase in the interest rate induces people to save less.
C)   downward because an increase in the interest rate induces people to invest less.
D)   upward because an increase in the interest rate induces people to invest more.E) All of the above
F) A) and B)

Question 11

Which of the following people purchased the correct asset to meet his or her objective?

Accepted Answer

A)   Michelle wanted to be a part owner of Mamma Rosa's Pizza,so she purchased a bond issued by Mamma Rosa's Pizza.
B)   Tim wanted a high return,even if it meant taking some risk,so he purchased stock issued by Specific Electric instead of bonds issued by Specific Electric.
C)   Jennifer wanted to buy equity in Honda,so she purchased bonds sold by Honda.
D)   All of the above are correct.E) C) and D)
F) A) and C)

Question 12

Figure 13-4.On the horizontal axis of the graph,L represents the quantity of loanable funds in billions of dollars. 
-Refer to Figure 13-4.The position and/or slope of the Supply curve are influenced by

Accepted Answer

A)   the level of public saving.
B)   the level of national saving.
C)   decisions made by people who have extra income they want to save and lend out.
D)   All of the above are correct.E) A) and B)
F) B) and C)

Question 13

In the Coen Brothers' movie The Hudsucker Proxy the board of directors picks someone to run the company who they believe will make poor decisions.If things turn out as they plan,

Accepted Answer

A)   the price of a share of stock in the Hudsucker corporation should decline as the demand for shares falls.
B)   the price of a share of stock in the Hudsucker corporation should rise as the demand for shares rises.
C)   the price of a share of stock in the Hudsucker corporation should decline as the supply of existing shares falls.
D)   the price of a share of stock in the Hudsucker corporation should rise as the supply of existing shares rises.E) A) and C)
F) A) and B)

Question 14

The slope of the demand for loanable funds curve represents the

Accepted Answer

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

Question 15

A stock index is

Accepted Answer

A)   an average of a group of stock prices.
B)   an average of a group of stock yields.
C)   a measure of the risk relative to the profitability of corporations.
D)   a report in a newspaper or other media outlet on the price of the stock and earnings of the corporation that issued the stock.E) All of the above
F) A) and B)

Question 16

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

Question 17

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

Question 18

What happens to desired investment spending if the interest rate rises? Is this response relevant to the supply of loanable funds curve or the demand for loanable funds curve?

Accepted Answer

Investment spending ...

Question 19

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 gener...

Question 20

Camp Company had total earnings of $600 million in 2008,out of which it retained $150 million for future investments.In 2008,its stock featured a dividend yield of 3 percent and 200 million shares were outstanding.The price-earnings ratio for Camp Company stock was

Accepted Answer

A)   8.33.
B)   12.00.
C)   16.67.
D)   25.00.E) B) and D)
F) B) and C)

Exam 26: Saving,investment,and the Financial System

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

Correct Answer
verified

If the nominal interest rate is 7 percent and the real interest rate is 2 percent,then what is the inflation rate?

Correct Answer
verified

What is a bond buyer promised when she buys a bond?

Correct Answer
verified

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

Correct Answer
verified

Which of the following would necessarily create a surplus at the original equilibrium interest rate in the loanable funds market?

Correct Answer
verified

In a closed economy,national saving is

Correct Answer
verified

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 Answer
verified

In the Coen Brothers' movie The Hudsucker Proxy the board of directors picks someone to run the company who they believe will make poor decisions.If things turn out as they plan,

Correct Answer
verified

Which of the following events could explain an increase in interest rates together with a decrease in investment?

Correct Answer
verified

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

Correct Answer
verified

What happens to desired investment spending if the interest rate rises? Is this response relevant to the supply of loanable funds curve or the demand for loanable funds curve?

Correct Answer
verified
Investment spending ...
View Answer

The supply of loanable funds slopes

Correct Answer
verified

Camp Company had total earnings of $600 million in 2008,out of which it retained $150 million for future investments.In 2008,its stock featured a dividend yield of 3 percent and 200 million shares were outstanding.The price-earnings ratio for Camp Company stock was

Correct Answer
verified

A stock index is

Correct Answer
verified

The slope of the demand for loanable funds curve represents the

Correct Answer
verified

Correct Answer
verified
a.A municipal bond.Municipal bonds gener...
View Answer

Which of the following people purchased the correct asset to meet his or her objective?

Correct Answer
verified

Figure 13-4.On the horizontal axis of the graph,L represents the quantity of loanable funds in billions of dollars. -Refer to Figure 13-4.The position and/or slope of the Supply curve are influenced by

Correct Answer
verified

Lenders sell bonds and borrowers buy them.

Correct Answer
verified

The slope of the supply of loanable funds curve represents the

Correct Answer
verified

Exam 26: Saving,investment,and the Financial System

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

Correct AnswerverifiedShow Answer

If the nominal interest rate is 7 percent and the real interest rate is 2 percent,then what is the inflation rate?

Correct AnswerverifiedShow Answer

What is a bond buyer promised when she buys a bond?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following would necessarily create a surplus at the original equilibrium interest rate in the loanable funds market?

Correct AnswerverifiedShow Answer

In a closed economy,national saving is

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

In the Coen Brothers' movie The Hudsucker Proxy the board of directors picks someone to run the company who they believe will make poor decisions.If things turn out as they plan,

Correct AnswerverifiedShow Answer

Which of the following events could explain an increase in interest rates together with a decrease in investment?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

What happens to desired investment spending if the interest rate rises? Is this response relevant to the supply of loanable funds curve or the demand for loanable funds curve?

Correct AnswerverifiedInvestment spending ...View AnswerShow Answer

The supply of loanable funds slopes

Correct AnswerverifiedShow Answer

Camp Company had total earnings of $600 million in 2008,out of which it retained $150 million for future investments.In 2008,its stock featured a dividend yield of 3 percent and 200 million shares were outstanding.The price-earnings ratio for Camp Company stock was

Correct AnswerverifiedShow Answer

A stock index is

Correct AnswerverifiedShow Answer

The slope of the demand for loanable funds curve represents the

Correct AnswerverifiedShow Answer

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

Which of the following people purchased the correct asset to meet his or her objective?

Correct AnswerverifiedShow Answer

Figure 13-4.On the horizontal axis of the graph,L represents the quantity of loanable funds in billions of dollars. -Refer to Figure 13-4.The position and/or slope of the Supply curve are influenced by

Correct AnswerverifiedShow Answer

Lenders sell bonds and borrowers buy them.

Correct AnswerverifiedShow Answer

The slope of the supply of loanable funds curve represents the

Correct AnswerverifiedShow 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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Investment spending ...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified

Correct Answer
verified
a.A municipal bond.Municipal bonds gener...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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