Question 1

Which of the following could explain a decrease in the equilibrium interest rate and in 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.E) All of the above
F) A) and B) B

Question 2

Alberta buys a paint sprayer and a lift for her car customizing shop.A macroeconomist would refer to these purchases as investment.

Accepted Answer

A) True 
 B)False

Question 3

Other things the same,if the government increases transfer payments to households,then the effect of this on the government's budget

Accepted Answer

A)   will make investment rise.
B)   will make the rate of interest rise.
C)   will make public saving rise.
D)   All of the above are correct.E) B) and C)
F) None of the above

Question 4

Which of the following could explain a decrease in the equilibrium interest rate and an increase in 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.E) A) and D)
F) A) and C)

Question 5

Long-term bonds are

Accepted Answer

A)   riskier than short-term bonds,and so interest rates on long-term bonds are usually lower than interest rates on short-term bonds.
B)   riskier than short-term bonds,and so interest rates on long-term bonds are usually higher than interest rates on short-term bonds.
C)   less risky than short-term bonds,and so interest rates on long-term bonds are usually lower than interest rates on short-term bonds.
D)   less risky than short-term bonds,and so interest rates on long-term bonds are usually higher than interest rates on short-term bonds.E) B) and D)
F) A) and C)

Question 6

Banks

Accepted Answer

A)   play a role in creating an asset that people can use as a medium of exchange.
B)   are financial intermediaries,but mutual funds are not financial intermediaries.
C)   are financial markets,as are bond markets.
D)   All of the above are correct.E) All of the above
F) None of the above

Question 7

As a money management fee,mutual funds usually charge their customers

Accepted Answer

A)   between 0.5 and 2.0 percent of assets each year.
B)   between 1.5 and 3.0 percent of assets each year.
C)   nothing,because they receive commissions from the firms whose stock they buy.
D)   a flat fee of about $50.E) B) and C)
F) A) and B)

Question 8

The fact that borrowers sometimes default on their loans by declaring bankruptcy is directly related to the characteristic of a bond called

Accepted Answer

A)   credit risk.
B)   interest risk.
C)   term risk.
D)   private risk.E) A) and D)
F) A) and B)

Question 9

In a closed economy,if taxes fall and consumption rises,then private saving must fall.

Accepted Answer

A) True 
 B)False

Question 10

Figure 18-3.The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves. 
-Refer to Figure 18-3.Which of the following movements would be consistent with the government budget going from deficit to surplus and the simultaneous enactment of an investment tax credit?

Accepted Answer

A)   a movement from Point A to Point C
B)   a movement from Point B to Point A
C)   a movement from Point B to Point F
D)   a movement from Point C to Point BE) C) and D)
F) None of the above

Question 11

Draw and label a graph showing equilibrium in the market for loanable funds.

Accepted Answer

Market for Loanable Funds

Question 12

A corporation's earnings are the amount of revenue it receives for the sale of its products

Accepted Answer

A)   minus its cost of production as measured by its accountants.Earnings must be paid out as dividends.
B)   minus its cost of production as measured by its accountants.Earnings may be paid out as dividends or retained by the corporation.
C)   minus its direct and indirect costs as measured by its economists.Earnings must be paid out as dividends.
D)   minus its direct and indirect cost as measure by its economists.Earnings may be paid out as dividends or retained by the corporation.E) A) and D)
F) All of the above

Question 13

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.E) All of the above
F) B) and C)

Question 14

According to the definitions of national saving and public saving,if Y,C,and G remained the same,an increase in taxes would

Accepted Answer

A)   raise national saving and public saving.
B)   raise national saving and raise public saving.
C)   leave national saving and public saving unchanged.
D)   leave national saving unchanged and raise public saving.E) None of the above
F) A) and B)

Question 15

The final element of a financial crisis is

Accepted Answer

A)   an economic downturn.
B)   a decline in confidence in financial institutions.
C)   declining prices of real estate or other assets.
D)   a vicious circle.E) A) and C)
F) None of the above

Question 16

What would happen in the market for loanable funds if the government were to increase the tax on interest income?

Accepted Answer

A)   Interest rates would rise.
B)   Interest rates would be unaffected.
C)   Interest rates would fall.
D)   The effect on the interest rate is uncertain.E) None of the above
F) C) and D)

Question 17

Which of the following counts as part of the supply of loanable funds?

Accepted Answer

A)   bank deposits and purchases of bonds
B)   bank deposits but not purchases of bonds
C)   purchases of bonds but not bank deposits
D)   neither purchases of bonds nor bank depositsE) A) and C)
F) B) and D)

Question 18

ABC Co.sells newly issued bonds.JLG Co.sells newly issued stocks.Which company is raising funds in financial markets?

Accepted Answer

A)   only ABC
B)   only JLG
C)   both ABC and JLG
D)   neither ABC nor JLGE) C) and D)
F) A) and C) C

Question 19

Which of the following is not an important stock exchange in the United States?

Accepted Answer

A)   New York Stock Exchange
B)   American Stock Exchange
C)   Chicago Mercantile Exchange
D)   NASDAQE) A) and D)
F) B) and C)

Question 20

In the small closed economy of San Lucretia,the currency is the denar.Statistics for last year show that private saving was 60 billion denars,taxes were 70 billion denars,government purchases of goods and services were 80 billion denars,there were no transfer payments by the government,and GDP was 400 billion denars.What were consumption and investment in San Lucretia?

Accepted Answer

A)   270 billion denars,50 billion denars
B)   260 billion denars,60 billion denars
C)   250 billion denars,70 billion denars
D)   None of the above is correct.E) C) and D)
F) All of the above

Exam 18: Saving,investment,and the Financial System

Which of the following could explain a decrease in the equilibrium interest rate and in the equilibrium quantity of loanable funds?

Correct Answer
verified
B

Alberta buys a paint sprayer and a lift for her car customizing shop.A macroeconomist would refer to these purchases as investment.

Correct Answer
verified

Other things the same,if the government increases transfer payments to households,then the effect of this on the government's budget

Correct Answer
verified

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

Correct Answer
verified

Long-term bonds are

Correct Answer
verified

Banks

Correct Answer
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As a money management fee,mutual funds usually charge their customers

Correct Answer
verified

The fact that borrowers sometimes default on their loans by declaring bankruptcy is directly related to the characteristic of a bond called

Correct Answer
verified

In a closed economy,if taxes fall and consumption rises,then private saving must fall.

Correct Answer
verified

Figure 18-3.The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves. -Refer to Figure 18-3.Which of the following movements would be consistent with the government budget going from deficit to surplus and the simultaneous enactment of an investment tax credit?

Correct Answer
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Draw and label a graph showing equilibrium in the market for loanable funds.

Correct Answer
verified
Market for Loanable Funds 11ea6f3b_0e6e_8943_af34_0bb46e4052ab_TB4798_00

A corporation's earnings are the amount of revenue it receives for the sale of its products

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

Correct Answer
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According to the definitions of national saving and public saving,if Y,C,and G remained the same,an increase in taxes would

Correct Answer
verified

The final element of a financial crisis is

Correct Answer
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What would happen in the market for loanable funds if the government were to increase the tax on interest income?

Correct Answer
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Which of the following counts as part of the supply of loanable funds?

Correct Answer
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ABC Co.sells newly issued bonds.JLG Co.sells newly issued stocks.Which company is raising funds in financial markets?

Correct Answer
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C

Which of the following is not an important stock exchange in the United States?

Correct Answer
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Correct Answer
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Exam 18: Saving,investment,and the Financial System

Which of the following could explain a decrease in the equilibrium interest rate and in the equilibrium quantity of loanable funds?

Correct AnswerverifiedB

Alberta buys a paint sprayer and a lift for her car customizing shop.A macroeconomist would refer to these purchases as investment.

Correct AnswerverifiedShow Answer

Other things the same,if the government increases transfer payments to households,then the effect of this on the government's budget

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Long-term bonds are

Correct AnswerverifiedShow Answer

Banks

Correct AnswerverifiedShow Answer

As a money management fee,mutual funds usually charge their customers

Correct AnswerverifiedShow Answer

The fact that borrowers sometimes default on their loans by declaring bankruptcy is directly related to the characteristic of a bond called

Correct AnswerverifiedShow Answer

In a closed economy,if taxes fall and consumption rises,then private saving must fall.

Correct AnswerverifiedShow Answer

Figure 18-3.The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves. -Refer to Figure 18-3.Which of the following movements would be consistent with the government budget going from deficit to surplus and the simultaneous enactment of an investment tax credit?

Correct AnswerverifiedShow Answer

Draw and label a graph showing equilibrium in the market for loanable funds.

Correct AnswerverifiedMarket for Loanable Funds 11ea6f3b_0e6e_8943_af34_0bb46e4052ab_TB4798_00

A corporation's earnings are the amount of revenue it receives for the sale of its products

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

According to the definitions of national saving and public saving,if Y,C,and G remained the same,an increase in taxes would

Correct AnswerverifiedShow Answer

The final element of a financial crisis is

Correct AnswerverifiedShow Answer

What would happen in the market for loanable funds if the government were to increase the tax on interest income?

Correct AnswerverifiedShow Answer

Which of the following counts as part of the supply of loanable funds?

Correct AnswerverifiedShow Answer

ABC Co.sells newly issued bonds.JLG Co.sells newly issued stocks.Which company is raising funds in financial markets?

Correct AnswerverifiedC

Which of the following is not an important stock exchange in the United States?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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B

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Market for Loanable Funds 11ea6f3b_0e6e_8943_af34_0bb46e4052ab_TB4798_00

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C

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