Question 1

Suppose that the government finds a major defect in one of a company's products and demands that it take it off the market.We would expect that the

Accepted Answer

A)  supply of existing shares of the stock and the price will both rise.
B)  supply of existing shares of the stock and the price will both fall.
C)  demand for existing shares of the stock and the price will both rise.
D)  demand for existing shares of the stock and the price will both fall.E) B) and C)
F) A) and C)

Question 2

Other things being constant,when a business issues more stock,the

Accepted Answer

A)  supply of the stock is greater and thus the price will fall.
B)  supply of the stock is less and thus the price will rise.
C)  demand for the stock is greater and thus the price will rise.
D)  demand for the stock is less and thus the price will fall.E) C) and D)
F) B) and D)

Question 3

Which of the following correctly includes the four expenditure categories of GDP?

Accepted Answer

A)  consumption, government purchases, investment, net-exports
B)  consumption, investment, depreciation, net-exports
C)  consumption, saving, investment, depreciation,
D)  consumption, government purchases, investment, savingsE) A) and B)
F) B) and D)

Question 4

The nominal interest rate is 6 percent and the real interest rate is 2 percent,what is the inflation rate?

Accepted Answer

A)  8 percent
B)  4 percent
C)  3 percent
D)  None of the above is correct.E) A) and B)
F) A) and C)

Question 5

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.E) All of the above
F) None of the above

Question 6

World Wide Delivery Service Corporation develops a way to speed up its deliveries and reduce its costs.We would expect that this would

Accepted Answer

A)  raise the demand for existing shares of the stock, causing the price to rise.
B)  decrease the demand for existing shares of the stock, causing the price to fall.
C)  raise the supply of the existing shares of stock, causing the price to rise.
D)  raise the supply of the existing shares of stock, causing the price to fall.E) A) and B)
F) A) and D)

Question 7

Which of the following would be an example of direct finance?

Accepted Answer

A)  A saver buys shares in a mutual fund.
B)  A saver deposits money into a credit union.
C)  A saver buys a bond a corporation has just issued so it can purchase capital.
D)  None of the above is correct.E) All of the above
F) A) and B)

Question 8

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

Question 9

As chief financial officer you sell newly issued bonds on behalf of your firm.Your firm is

Accepted Answer

A)  borrowing directly.
B)  borrowing indirectly.
C)  lending directly.
D)  lending indirectly.E) A) and B)
F) A) and C)

Question 10

If in the past Congress had taken additional actions to make saving more rewarding,then today it is likely that the equilibrium interest rate

Accepted Answer

A)  and quantity of loanable funds would be lower.
B)  and quantity of loanable funds would be higher.
C)  would be higher and the equilibrium quantity of loanable funds would be lower.
D)  would be lower and the equilibrium quantity of loanable funds would be higher.E) B) and D)
F) A) and D)

Question 11

Suppose that in a closed economy GDP is equal to 11,000,Taxes are equal to 2,500,Consumption equals 7,000,and Government purchases equal 3,000.What are private saving and public saving?

Accepted Answer

A)  1500 and -500
B)  1500 and 500
C)  1000 and -500
D)  1000 and 500E) C) and D)
F) All of the above

Question 12

A mutual fund

Accepted Answer

A)  is a financial market where small firms mutually agree to sell stocks and bonds to raise funds.
B)  is funds set aside by local governments to lend to small firms who want to invest in projects that are mutually beneficial to the firm and community.
C)  sells stocks and bonds on behalf of small and less known firms who would otherwise have to pay high interest to obtain credit.
D)  is an institution that sells shares to the public and uses the proceeds to buy a selection of various types of stocks, bonds, or both stocks and bonds.E) A) and D)
F) B) and C)

Question 13

When opening a restaurant you may need to buy ovens,freezers,tables,and cash registers.Economists call these expenditures

Accepted Answer

A)  capital investment.
B)  investment in human capital.
C)  business consumption expenditures.
D)  None of the above is correct.E) A) and B)
F) All of the above

Question 14

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) None of the above
F) All of the above

Question 15

Investment falls and interest rates rise.Which of the following could explain these changes?

Accepted Answer

A)  The government 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 B)
F) C) and D)

Question 16

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 deficit for

Accepted Answer

A)  only country a.
B)  only country B.
C)  only country C.
D)  all three countries.E) A) and D)
F) None of the above

Question 17

The sale of stocks

Accepted Answer

A)  and bonds to raise money is called debt finance.
B)  and bonds to raise money is called equity finance.
C)  to raise money is called debt finance, while the sale of bonds to raise funds is called equity finance.
D)  to raise money is called equity finance, while the sale of bonds to raise funds is called debt finance.E) None of the above
F) All of the above

Question 18

Which of the following would be included as investment in the GDP accounts?

Accepted Answer

A)  the government buys goods from another country
B)  someone buys stock in an American company
C)  a firm increases its capital stock
D)  All of the above are correct.E) All of the above
F) B) and D)

Question 19

Jerry has the choice of two bonds,one that pays 3 percent interest and one that pays 6 percent interest.Which of the following is most likely?

Accepted Answer

A)  The 6 percent bond is less risky than the 3 percent bond.
B)  The 6 percent bond is a U.S.government bond, and the 3 percent bond is a junk bond.
C)  The 6 percent bond has a longer term than the 3 percent bond.
D)  The 6 percent bond is a municipal bond, and the 3 percent bond is a U.S.government bond.E) A) and B)
F) A) and C)

Question 20

Which of the following is correct?

Accepted Answer

A)  A large, well-known corporation like Proctor and Gamble would generally use financial intermediation to finance expansion of its factories.
B)  On average, indexed funds outperform managed funds.
C)  Unlike corporate bonds and stocks, checking accounts are a store of value.
D)  Financial intermediaries are institutions through which savers can directly provide funds to borrowers.E) C) and D)
F) None of the above

Exam 26: Saving, investment, and the Financial System

As chief financial officer you sell newly issued bonds on behalf of your firm.Your firm is

Correct Answer
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A mutual fund

Correct Answer
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Which of the following correctly includes the four expenditure categories of GDP?

Correct Answer
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World Wide Delivery Service Corporation develops a way to speed up its deliveries and reduce its costs.We would expect that this would

Correct Answer
verified

If there is a shortage of loanable funds,then

Correct Answer
verified

Which of the following would be included as investment in the GDP accounts?

Correct Answer
verified

Jerry has the choice of two bonds,one that pays 3 percent interest and one that pays 6 percent interest.Which of the following is most likely?

Correct Answer
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The sale of stocks

Correct Answer
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Which of the following is correct?

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

Correct Answer
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Suppose that in a closed economy GDP is equal to 11,000,Taxes are equal to 2,500,Consumption equals 7,000,and Government purchases equal 3,000.What are private saving and public saving?

Correct Answer
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The nominal interest rate is 6 percent and the real interest rate is 2 percent,what is the inflation rate?

Correct Answer
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If in the past Congress had taken additional actions to make saving more rewarding,then today it is likely that the equilibrium interest rate

Correct Answer
verified

Which of the following would be an example of direct finance?

Correct Answer
verified

Investment falls and interest rates rise.Which of the following could explain these changes?

Correct Answer
verified

Suppose that the government finds a major defect in one of a company's products and demands that it take it off the market.We would expect that the

Correct Answer
verified

The supply of loanable funds slopes

Correct Answer
verified

Other things being constant,when a business issues more stock,the

Correct Answer
verified

Correct Answer
verified

When opening a restaurant you may need to buy ovens,freezers,tables,and cash registers.Economists call these expenditures

Correct Answer
verified

Exam 26: Saving, investment, and the Financial System

As chief financial officer you sell newly issued bonds on behalf of your firm.Your firm is

Correct AnswerverifiedShow Answer

A mutual fund

Correct AnswerverifiedShow Answer

Which of the following correctly includes the four expenditure categories of GDP?

Correct AnswerverifiedShow Answer

World Wide Delivery Service Corporation develops a way to speed up its deliveries and reduce its costs.We would expect that this would

Correct AnswerverifiedShow Answer

If there is a shortage of loanable funds,then

Correct AnswerverifiedShow Answer

Which of the following would be included as investment in the GDP accounts?

Correct AnswerverifiedShow Answer

Jerry has the choice of two bonds,one that pays 3 percent interest and one that pays 6 percent interest.Which of the following is most likely?

Correct AnswerverifiedShow Answer

The sale of stocks

Correct AnswerverifiedShow Answer

Which of the following is correct?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Suppose that in a closed economy GDP is equal to 11,000,Taxes are equal to 2,500,Consumption equals 7,000,and Government purchases equal 3,000.What are private saving and public saving?

Correct AnswerverifiedShow Answer

The nominal interest rate is 6 percent and the real interest rate is 2 percent,what is the inflation rate?

Correct AnswerverifiedShow Answer

If in the past Congress had taken additional actions to make saving more rewarding,then today it is likely that the equilibrium interest rate

Correct AnswerverifiedShow Answer

Which of the following would be an example of direct finance?

Correct AnswerverifiedShow Answer

Investment falls and interest rates rise.Which of the following could explain these changes?

Correct AnswerverifiedShow Answer

Suppose that the government finds a major defect in one of a company's products and demands that it take it off the market.We would expect that the

Correct AnswerverifiedShow Answer

The supply of loanable funds slopes

Correct AnswerverifiedShow Answer

Other things being constant,when a business issues more stock,the

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When opening a restaurant you may need to buy ovens,freezers,tables,and cash registers.Economists call these expenditures

Correct AnswerverifiedShow Answer

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