Question 1

Which of the following statements is correct?

Accepted Answer

A)   A general,persistent decline in stock prices may signal that the economy is about to enter a boom period because people will be able to buy stock for less money.
B)   A general,persistent decline in stock prices may signal that the economy is about to enter a recession because low stock prices may mean that people are expecting low corporate profits.
C)   A general,persistent decline in stock prices may signal that the economy is about to enter a recession because low stock prices mean that corporations have had low profits in the past.
D)   Expectations about the business cycle have no impact on stock prices.E) B) and D)
F) A) and B)

Question 2

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

Question 3

Which of the following is both a financial institution and a financial intermediary?

Accepted Answer

A)   banks
B)   stock exchanges
C)   the bond market
D)   All of the above are correct.E) B) and C)
F) B) and D)

Question 4

If Congress instituted an investment tax credit,the demand for loanable funds would shift rightward.

Accepted Answer

A) True 
 B)False

Question 5

Last quarter in a closed economy GDP was 100,000.Expenditures on capital goods such as business equipment and structures was 10,000,inventory rose 1,000,and new construction of homes was 5,000.Consumption was 65,000,taxes were 15,000.What was public saving?

Accepted Answer

A)   -4,000
B)   -5,000
C)   -14,000
D)   -15,000E) A) and C)
F) A) and B)

Question 6

In a small closed economy investment is $50 billion and private saving is $55 billion.What are public saving and national saving?

Accepted Answer

A)   $60 billion and $5 billion
B)   $50 billion and -$5 billion
C)   $5 billion and $60 billion
D)   -$5 billion and $50 billionE) B) and D)
F) All of the above

Question 7

In which of the following cases would it necessarily be true that national saving and private saving are equal for a closed economy?

Accepted Answer

A)   Private saving is equal to government expenditures.
B)   Public saving is equal to investment.
C)   After paying their taxes and paying for their consumption,households have nothing left.
D)   The government's tax revenue is equal to its expenditures.E) A) and B)
F) B) and C)

Question 8

Suppose the Congress and president decreased the maximum annual contributions limits to retirement accounts and at the same time reduced the budget deficit.What would happen to the interest rate?

Accepted Answer

A)   It would decrease.
B)   It would increase.
C)   It would stay the same.
D)   It might do any of the above.E) A) and B)
F) None of the above

Question 9

The Dow Jones Industrial Average is now based on the prices of the stocks of

Accepted Answer

A)   30 major U.S.corporations.
B)   100 major U.S.corporations.
C)   500 representative U.S.corporations.
D)   1,000 representative U.S.corporations.E) C) and D)
F) B) and C)

Question 10

Index funds are usually outperformed by mutual funds that are actively managed by professional money managers.

Accepted Answer

A) True 
 B)False

Question 11

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

Accepted Answer

A)   there is a surplus so interest rates will rise.
B)   there is a surplus so interest rates will fall.
C)   there is a shortage so interest rates will rise.
D)   there is a shortage so interest rates will fall.E) A) and B)
F) C) and D)

Question 12

Consider three different closed economies with the following national income statistics.Country A has taxes of $40 billion,transfers of $20 billion,and government expenditures on goods and services of $30 billion.County B has private savings of $60 billion,and investment expenditures of $50 billion.Country C has GDP of $300 billion,investment of $70,consumption of $180 billion,taxes of $60 billion and transfers of $20 billion.From this information we know that there is a $10 billion government budget deficit for

Accepted Answer

A)   only country A.
B)   only country B.
C)   only country C.
D)   all three countries.E) All of the above
F) A) and D)

Question 13

Suppose the city of Des Moines has a high credit rating,and so when Des Moines borrows funds by selling bonds,

Accepted Answer

A)   the city's high credit rating and the tax status of municipal bonds both contribute to a lower interest rate than would otherwise apply.
B)   the city's high credit rating and the tax status of municipal bonds both contribute to a higher interest rate than would otherwise apply.
C)   the city's high credit rating contributes to a lower interest rate than would otherwise apply,while the tax status of municipal bonds contributes to a higher interest rate than would otherwise apply.
D)   the city's high credit rating contributes to a higher interest rate than would otherwise apply,while the tax status of municipal bonds contributes to a lower interest rate than would otherwise apply.E) B) and D)
F) C) and D)

Question 14

When opening a print shop you need to buy printers,computers,furniture,and similar items.Economists call these expenditures

Accepted Answer

A)   capital investment.
B)   investment in human capital.
C)   business consumption expenditures.
D)   personal saving.E) A) and B)
F) All of the above

Question 15

Suppose that in a closed economy GDP is equal to 11,000,taxes are equal to 2,500 consumption equals 7,500 and government purchases equal 2,000.What are private saving,public saving,and national saving?

Accepted Answer

A)   1,500,1,000,and 500,respectively
B)   1,000,500,and 1,500,respectively
C)   500,1,500,and 1,000,respectively
D)   None of the above is correct.E) A) and B)
F) All of the above

Question 16

Which of the following is correct?

Accepted Answer

A)   Lenders sell bonds and borrowers buy them.
B)   Long-term bonds usually pay a lower interest rate than do short-term bonds because long-term bonds are riskier.
C)   The term junk bonds refers to bonds that have been resold many times.
D)   None of the above is correct.E) None of the above
F) B) and C)

Question 17

Identify each of the following acts as representing either saving or investment.
a.
Fred uses some of his income to buy government bonds.
b.
Julie takes some of her income and buys mutual funds.
c.
Alex purchases a new truck for his delivery business using borrowed funds.
d.
Elaine uses some of her income to buy stock in a major corporation.
e.
Henrietta hires a builder to construct a new building for her bicycle shop.

Accepted Answer

a. Fred is saving. b. Julie is...

Question 18

Suppose the U.S.offered a tax credit for firms that built new factories in the U.S..Then

Accepted Answer

A)   the demand for loanable funds would shift rightward,initially creating a surplus of loanable funds at the original interest rate.
B)   the demand for loanable funds would shift rightward,initially creating a shortage of loanable funds at the original interest rate.
C)   the supply of loanable funds would shift rightward,initially creating a surplus of loanable funds at the original interest rate.
D)   the supply of loanable funds would shift rightward,initially creating a shortage of loanable funds at the original interest rate.E) A) and B)
F) A) and C)

Question 19

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 20

Which of the following statements about mutual funds is correct?

Accepted Answer

A)   A mutual fund is a financial intermediary.
B)   A mutual fund acquires its funds primarily by selling shares to the public.
C)   People who buy shares from a mutual fund accept all of the risk and return associated with the mutual fund's portfolio.
D)   All of the above are correct.E) A) and C)
F) A) and D)

Exam 18: Saving,investment,and the Financial System

In which of the following cases would it necessarily be true that national saving and private saving are equal for a closed economy?

Correct Answer
verified

If Congress instituted an investment tax credit,the demand for loanable funds would shift rightward.

Correct Answer
verified

Index funds are usually outperformed by mutual funds that are actively managed by professional money managers.

Correct Answer
verified

The Dow Jones Industrial Average is now based on the prices of the stocks of

Correct Answer
verified

Last quarter in a closed economy GDP was 100,000.Expenditures on capital goods such as business equipment and structures was 10,000,inventory rose 1,000,and new construction of homes was 5,000.Consumption was 65,000,taxes were 15,000.What was public saving?

Correct Answer
verified

Which of the following statements about mutual funds is correct?

Correct Answer
verified

Which of the following statements is correct?

Correct Answer
verified

Suppose the Congress and president decreased the maximum annual contributions limits to retirement accounts and at the same time reduced the budget deficit.What would happen to the interest rate?

Correct Answer
verified

Which of the following is correct?

Correct Answer
verified

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 Answer
verified

Suppose the city of Des Moines has a high credit rating,and so when Des Moines borrows funds by selling bonds,

Correct Answer
verified

Suppose that in a closed economy GDP is equal to 11,000,taxes are equal to 2,500 consumption equals 7,500 and government purchases equal 2,000.What are private saving,public saving,and national saving?

Correct Answer
verified

Correct Answer
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Which of the following is both a financial institution and a financial intermediary?

Correct Answer
verified

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

Correct Answer
verified

In a small closed economy investment is $50 billion and private saving is $55 billion.What are public saving and national saving?

Correct Answer
verified

Suppose the U.S.offered a tax credit for firms that built new factories in the U.S..Then

Correct Answer
verified

Correct Answer
verified
a. Fred is saving. b. Julie is...
View Answer

When opening a print shop you need to buy printers,computers,furniture,and similar items.Economists call these expenditures

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

Exam 18: Saving,investment,and the Financial System

In which of the following cases would it necessarily be true that national saving and private saving are equal for a closed economy?

Correct AnswerverifiedShow Answer

If Congress instituted an investment tax credit,the demand for loanable funds would shift rightward.

Correct AnswerverifiedShow Answer

Index funds are usually outperformed by mutual funds that are actively managed by professional money managers.

Correct AnswerverifiedShow Answer

The Dow Jones Industrial Average is now based on the prices of the stocks of

Correct AnswerverifiedShow Answer

Last quarter in a closed economy GDP was 100,000.Expenditures on capital goods such as business equipment and structures was 10,000,inventory rose 1,000,and new construction of homes was 5,000.Consumption was 65,000,taxes were 15,000.What was public saving?

Correct AnswerverifiedShow Answer

Which of the following statements about mutual funds is correct?

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Suppose the Congress and president decreased the maximum annual contributions limits to retirement accounts and at the same time reduced the budget deficit.What would happen to the interest rate?

Correct AnswerverifiedShow Answer

Which of the following is correct?

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

Suppose the city of Des Moines has a high credit rating,and so when Des Moines borrows funds by selling bonds,

Correct AnswerverifiedShow Answer

Suppose that in a closed economy GDP is equal to 11,000,taxes are equal to 2,500 consumption equals 7,500 and government purchases equal 2,000.What are private saving,public saving,and national saving?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following is both a financial institution and a financial intermediary?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In a small closed economy investment is $50 billion and private saving is $55 billion.What are public saving and national saving?

Correct AnswerverifiedShow Answer

Suppose the U.S.offered a tax credit for firms that built new factories in the U.S..Then

Correct AnswerverifiedShow Answer

Correct Answerverifieda. Fred is saving. b. Julie is...View AnswerShow Answer

When opening a print shop you need to buy printers,computers,furniture,and similar items.Economists call these expenditures

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

Correct Answer
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a. Fred is saving. b. Julie is...
View Answer

Correct Answer
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Correct Answer
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