Question 1

A low P/E for a stock indicates that

Accepted Answer

A)   people may expect earnings to fall in the future,perhaps because the firm will be faced with increased competition.
B)   its dividends have been low so that no one is willing to pay very much for it.
C)   the corporation is possibly overvalued.
D)   All of the above are correct.E) None of the above
F) A) and D)

Question 2

Nastech Pharmaceuticals announced it has developed a nasal spray that would reduce hunger cravings.Other things the same we would expect

Accepted Answer

A)   the demand for existing shares of stock in this company to decrease,so the price would fall.
B)   the demand for existing shares of stock in this company to increase,so the price would rise.
C)   the supply of existing shares of stock in this company to decrease,so the price would fall.
D)   the supply of existing shares of stock in this company to increase,so the price would rise.E) None of the above
F) A) and B)

Question 3

Skyline Chili wants to finance the purchase of new equipment for its restaurants.The firm has limited internal funds,so Skyline likely will

Accepted Answer

A)   demand funds from the financial system by buying bonds.
B)   demand funds from the financial system by selling bonds.
C)   supply funds to the financial system by buying bonds.
D)   supply funds to the financial system by selling bonds.E) A) and B)
F) A) and C)

Question 4

Larry buys stock in A to Z Express Company.Curly Corporation builds a new factory.Whose transaction would be an act of investment in the language of macroeconomics?

Accepted Answer

A)   only Larry's
B)   only Curly Corporation's
C)   Larry's and Curly Corporation's
D)   neither Larry's nor Curly Corporation'sE) None of the above
F) All of the above

Question 5

Which of the following is correct?

Accepted Answer

A)   In a closed economy,equilibrium in the market for loanable funds occurs where saving = investment.
B)   Investment is the source for the supply of loanable funds.
C)   If there is a surplus in the market for loanable funds,the interest rate rises.
D)   All of the above are correctE) B) and C)
F) All of the above

Question 6

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

Question 7

Which of the following is not correct?

Accepted Answer

A)   By saving a larger portion of its GDP,a country can raise its output per worker.
B)   Savers supply their money to the financial system with the expectation that they will get it back with interest at a later date.
C)   Financial intermediaries are the only type of financial institution.
D)   The financial system helps match people's saving with other people's borrowing.E) C) and D)
F) A) and D)

Question 8

By definition,government purchases and taxes are zero for a closed economy.

Accepted Answer

A) True 
 B)False

Question 9

The supply of loanable funds would shift to the right if either

Accepted Answer

A)   tax reforms encouraged greater saving or the budget deficit became smaller.
B)   tax reforms encouraged greater saving or investment tax credits were increased.
C)   the budget deficit became larger or investment tax credits were increased.
D)   the budget deficit became larger or tax reforms discouraged saving.E) None of the above
F) A) and B)

Question 10

Which of the following are financial intermediaries?

Accepted Answer

A)   both banks and mutual funds
B)   banks but not mutual funds
C)   mutual funds but not banks
D)   neither banks or mutual fundsE) A) and D)
F) B) and D)

Question 11

For a closed economy,GDP is $12 trillion,consumption is $7 trillion,taxes net of transfers are $3 trillion and the government runs a deficit of $1 trillion.What are private saving and national saving?

Accepted Answer

A)   $5 trillion and $3 trillion,respectively
B)   $5 trillion and $1 trillion,respectively
C)   $2 trillion and $3 trillion,respectively
D)   $2 trillion and $1 trillion,respectivelyE) B) and C)
F) A) and D)

Question 12

Suppose the economy is closed and consumption is 6,500,taxes are 1,500,and government purchases are 2,000.If national saving amounts to 1,000,then what is GDP?

Accepted Answer

A)   9,500
B)   10,000
C)   10,500
D)   11,000E) B) and C)
F) None of the above

Question 13

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)   1,500 and -500,respectively
B)   1,500 and 500,respectively
C)   1,000 and -500,respectively
D)   1,000 and 500,respectivelyE) All of the above
F) C) and D)

Question 14

The length of time until a bond matures is called the

Accepted Answer

A)   perpetuity.
B)   term.
C)   maturity.
D)   intermediation.E) B) and C)
F) A) and D)

Question 15

Financial crises seldom involve economic downturns.

Accepted Answer

A) True 
 B)False

Question 16

It is claimed that a secondary advantage of mutual funds is that

Accepted Answer

A)   an investor can avoid investment charges and fees.
B)   they give ordinary people access to loanable funds for investing.
C)   they usually outperform stock market indexes.
D)   they give ordinary people access to the skills of professional money managers.E) A) and B)
F) None of the above

Question 17

Which of the following numbers is not associated with shares of a company's stock?

Accepted Answer

A)   term
B)   dividend
C)   price
D)   price-earnings ratioE) B) and D)
F) B) and C)

Question 18

If the government currently has a budget deficit,then

Accepted Answer

A)   it does not necessarily have a debt.
B)   its debt is increasing.
C)   government expenditures are greater than taxes.
D)   All of the above are correct.E) B) and C)
F) C) and D)

Question 19

Suppose that Congress were to repeal an investment tax credit.What would happen in the market for loanable funds?

Accepted Answer

A)   The demand and supply of loanable funds would shift right.
B)   The demand and supply of loanable funds would shift left.
C)   The supply of loanable funds would shift right.
D)   The demand for loanable funds would shift left.E) All of the above
F) A) and D)

Question 20

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) B) and D)
F) B) and C)

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

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Nastech Pharmaceuticals announced it has developed a nasal spray that would reduce hunger cravings.Other things the same we would expect

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By definition,government purchases and taxes are zero for a closed economy.

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Skyline Chili wants to finance the purchase of new equipment for its restaurants.The firm has limited internal funds,so Skyline likely will

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A low P/E for a stock indicates that

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Suppose the economy is closed and consumption is 6,500,taxes are 1,500,and government purchases are 2,000.If national saving amounts to 1,000,then what is GDP?

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Which of the following are financial intermediaries?

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Banks

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Financial crises seldom involve economic downturns.

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Which of the following is correct?

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Which of the following numbers is not associated with shares of a company's stock?

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For a closed economy,GDP is $12 trillion,consumption is $7 trillion,taxes net of transfers are $3 trillion and the government runs a deficit of $1 trillion.What are private saving and national saving?

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Suppose that Congress were to repeal an investment tax credit.What would happen in the market for loanable funds?

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Which of the following is not correct?

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The length of time until a bond matures is called the

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The supply of loanable funds would shift to the right if either

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Larry buys stock in A to Z Express Company.Curly Corporation builds a new factory.Whose transaction would be an act of investment in the language of macroeconomics?

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It is claimed that a secondary advantage of mutual funds is that

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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?

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If the government currently has a budget deficit,then

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