Question 1

Figure 26-4. On the horizontal axis of the graph, L represents the quantity of loanable funds in billions of dollars. 1. B)  D2. C)  between D1 and D2. D)  to the left of D1." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 26-4. Regard the position of the Supply curve as fixed, as on the graph. If the real interest rate is 4 percent, the inflation rate is 2 percent, and the market for loanable funds is in equilibrium, then the position of the demand-for-loanable-funds curve must be

Accepted Answer

A)   D1.
B)   D2.
C)   between D1 and D2.
D)   to the left of D1.E) B) and D)
F) None of the above

Question 2

Which of the following restrictions implies that private saving and investment are equal for a closed economy?

Accepted Answer

A)   Consumption and private saving are equal.
B)   The economy's government is running neither a surplus nor a deficit.
C)   Private saving and public saving are both zero.
D)   No restriction is necessary; private saving and investment are equal for all closed economies.E) B) and D)
F) All of the above

Question 3

Public saving is the difference between and .

Accepted Answer

tax revenue, governm...

Question 4

If the government reduces transfer payments, what happens to the budget deficit? What curve does this change in the market for loanable funds, which direction does it shift, and what happens to the equilibrium interest rate?

Accepted Answer

A reduction in transfer paymen...

Question 5

If the government instituted an investment tax credit, then which of the following would be higher in equilibrium?

Accepted Answer

A)   saving and the interest rate
B)   saving but not the interest rate
C)   the interest rate but not saving
D)   neither saving nor the interest rateE) None of the above
F) C) and D)

Question 6

Jim buys a $1000 bond from ABC Company. ABC Company uses the $1000 to purchase a new piece of machinery. Whose spending would be an act of investment in the language of macroeconomics?

Accepted Answer

A)   only Jim's
B)   only ABC Corporation's
C)   Jim's and ABC Corporation's
D)   neither Jim's nor ABC Corporation'sE) A) and B)
F) A) and C)

Question 7

Which of the following lists correctly identifies 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 D)
F) A) and C)

Question 8

Which of the following statements is not correct?

Accepted Answer

A)   If GDP is rising faster than debt, the government is, in some sense, living within its means.
B)   The ratio of debt to GDP in the United States has always been less than one.
C)   Debts during wars may distribute the burden of fighting the war more evenly across generations.
D)   During times of peace in the United States, the ratio of debt to GDP sometimes rose.E) C) and D)
F) All of the above

Question 9

Which of the following is correct?

Accepted Answer

A)   Some bonds have terms as short as a few months.
B)   Because they are so risky, junk bonds pay a low rate of interest.
C)   Corporations buy bonds to raise funds.
D)   All of the above are correct.E) All of the above
F) A) and B)

Question 10

Which of the following is not always correct for a closed economy?

Accepted Answer

A)   National saving equals private saving plus public saving.
B)   Net exports equal zero.
C)   Real GDP measures both income and expenditures.
D)   Private saving equals investment.E) B) and C)
F) A) and D)

Question 11

Which of the following could explain an increase in the interest rate and 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) B) and C)
F) None of the above

Question 12

At the broadest level, the financial system moves the economy's scarce resources from

Accepted Answer

A)   the rich to the poor.
B)   financial institutions to business firms and government.
C)   households to financial institutions.
D)   savers to borrowers.E) C) and D)
F) B) and C)

Question 13

Suppose government expenditures on goods and services and net taxes both decrease, and expenditures fall by more than net taxes. The effects of these changes on the budget deficit 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) A) and D)
F) A) and C)

Question 14

If the budget deficit increases then

Accepted Answer

A)   saving and the interest rate rise
B)   saving rises and the interest rate falls
C)   saving falls and the interest rate rises
D)   saving and the interest rate fallsE) B) and D)
F) A) and C)

Question 15

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) C) and D)
F) A) and D)

Question 16

Which of the following statements is correct?

Accepted Answer

A)   A large, well-known corporation such as 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) A) and B)
F) A) and C)

Question 17

On which of these bonds is the prospect of default least likely?

Accepted Answer

A)   a junk bond
B)   a bond issued by the state of Arizona
C)   a bond issued by the federal government
D)   a bond issued by General Electric CorporationE) A) and C)
F) All of the above

Question 18

Suppose there is a shortage in the market for loanable funds. Is the interest rate above or below its equilibrium level? How do desired saving and desired investment at this interest rate compare?

Accepted Answer

The interest rate is below its...

Question 19

The country of Cedarland does not trade with any other country. Its GDP is $17 billion. Its government purchases $5 billion worth of goods and services each year and collects $6 billion in taxes. Private saving in Cedarland is $5 billion. For Cedarland,

Accepted Answer

A)   investment is $6 billion and consumption is $7 billion.
B)   investment is $6 billion and consumption is $6 billion.
C)   investment is $7 billion and consumption is $7 billion.
D)   investment is $7 billion and consumption is $6 billion.E) None of the above
F) B) and C)

Question 20

If a firm wants to borrow it can

Accepted Answer

A)   supply bonds by selling them.
B)   supply bonds by buying them.
C)   demand bonds by selling them.
D)   demand bonds by buying them.E) None of the above
F) All of the above

Exam 18: Saving, Investment, and the Financial System

At the broadest level, the financial system moves the economy's scarce resources from

Correct Answer
verified

Suppose government expenditures on goods and services and net taxes both decrease, and expenditures fall by more than net taxes. The effects of these changes on the budget deficit cause

Correct Answer
verified

Which of the following is not always correct for a closed economy?

Correct Answer
verified

On which of these bonds is the prospect of default least likely?

Correct Answer
verified

Public saving is the difference between and .

Correct Answer
verified
tax revenue, governm...
View Answer

Which of the following restrictions implies that private saving and investment are equal for a closed economy?

Correct Answer
verified

Suppose there is a shortage in the market for loanable funds. Is the interest rate above or below its equilibrium level? How do desired saving and desired investment at this interest rate compare?

Correct Answer
verified
The interest rate is below its...
View Answer

Which of the following statements is not correct?

Correct Answer
verified

Which of the following is correct?

Correct Answer
verified

Correct Answer
verified

Which of the following lists correctly identifies the four expenditure categories of GDP?

Correct Answer
verified

Jim buys a $1000 bond from ABC Company. ABC Company uses the $1000 to purchase a new piece of machinery. Whose spending would be an act of investment in the language of macroeconomics?

Correct Answer
verified

If a firm wants to borrow it can

Correct Answer
verified

Which of the following is correct?

Correct Answer
verified

The country of Cedarland does not trade with any other country. Its GDP is $17 billion. Its government purchases $5 billion worth of goods and services each year and collects $6 billion in taxes. Private saving in Cedarland is $5 billion. For Cedarland,

Correct Answer
verified

If the government reduces transfer payments, what happens to the budget deficit? What curve does this change in the market for loanable funds, which direction does it shift, and what happens to the equilibrium interest rate?

Correct Answer
verified
A reduction in transfer paymen...
View Answer

If the government instituted an investment tax credit, then which of the following would be higher in equilibrium?

Correct Answer
verified

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

Correct Answer
verified

If the budget deficit increases then

Correct Answer
verified

Which of the following statements is correct?

Correct Answer
verified

Exam 18: Saving, Investment, and the Financial System

At the broadest level, the financial system moves the economy's scarce resources from

Correct AnswerverifiedShow Answer

Suppose government expenditures on goods and services and net taxes both decrease, and expenditures fall by more than net taxes. The effects of these changes on the budget deficit cause

Correct AnswerverifiedShow Answer

Which of the following is not always correct for a closed economy?

Correct AnswerverifiedShow Answer

On which of these bonds is the prospect of default least likely?

Correct AnswerverifiedShow Answer

Public saving is the difference between and .

Correct Answerverifiedtax revenue, governm...View AnswerShow Answer

Which of the following restrictions implies that private saving and investment are equal for a closed economy?

Correct AnswerverifiedShow Answer

Suppose there is a shortage in the market for loanable funds. Is the interest rate above or below its equilibrium level? How do desired saving and desired investment at this interest rate compare?

Correct AnswerverifiedThe interest rate is below its...View AnswerShow Answer

Which of the following statements is not correct?

Correct AnswerverifiedShow Answer

Which of the following is correct?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following lists correctly identifies the four expenditure categories of GDP?

Correct AnswerverifiedShow Answer

Jim buys a $1000 bond from ABC Company. ABC Company uses the $1000 to purchase a new piece of machinery. Whose spending would be an act of investment in the language of macroeconomics?

Correct AnswerverifiedShow Answer

If a firm wants to borrow it can

Correct AnswerverifiedShow Answer

Which of the following is correct?

Correct AnswerverifiedShow Answer

The country of Cedarland does not trade with any other country. Its GDP is $17 billion. Its government purchases $5 billion worth of goods and services each year and collects $6 billion in taxes. Private saving in Cedarland is $5 billion. For Cedarland,

Correct AnswerverifiedShow Answer

If the government reduces transfer payments, what happens to the budget deficit? What curve does this change in the market for loanable funds, which direction does it shift, and what happens to the equilibrium interest rate?

Correct AnswerverifiedA reduction in transfer paymen...View AnswerShow Answer

If the government instituted an investment tax credit, then which of the following would be higher in equilibrium?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If the budget deficit increases then

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

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tax revenue, governm...
View Answer

Correct Answer
verified

Correct Answer
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The interest rate is below its...
View 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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A reduction in transfer paymen...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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