Question 1

Which of the following statements is correct?

Accepted Answer

A)  The expected future profitability of a corporation influences the demand for its stock.
B)  When a corporation sells stock as a means of raising funds it is engaging in debt finance.
C)  The owners of bonds sold by the Microsoft Corporation are part owners of that corporation.
D)  A corporation is paid every time its shares of stock are traded organized stock exchanges.E) A) and B)
F) A) and C)

Question 2

Because of differences in tax treatment, municipal bonds pay a higher interest rate than do corporate bonds.

Accepted Answer

A) True 
 B)False

Question 3

A _____ does not engage in international trade in goods and services and it does not engage in international borrowing and lending.

Accepted Answer

The answer of A _____ does not engage in international...

Question 4

Congress and the President allow people to make greater contributions to tax-deferred savings accounts. Which curve in the market for loanable funds would shift, which direction would it shift, what would happen to the interest rate, and what would happen to investment spending?

Accepted Answer

The supply of loanable funds w...

Question 5

If consumers reduced their spending, what would happen to the interest rate and investment?

Accepted Answer

The interest rate wo...

Question 6

Figure 26-3
The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves.
​ 1 to D2 is called A) a decrease in the quantity of loanable funds demanded. B) an increase in the demand for loanable funds. C) an increase in the quantity of loanable funds demanded. D) a decrease in the demand for loanable funds." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 26-3. A shift of the demand curve from D1 to D2 is called

Accepted Answer

A)  a decrease in the quantity of loanable funds demanded.
B)  an increase in the demand for loanable funds.
C)  an increase in the quantity of loanable funds demanded.
D)  a decrease in the demand for loanable funds.E) None of the above
F) A) and D)

Question 7

In a closed economy, GDP is $1000, government purchases are $200, and consumption is $700. If the government has a budget surplus of $25, what are investment, taxes, private saving, and national saving?

Accepted Answer

Investment = $100, T...

Question 8

Other things the same, corporate bonds generally feature higher interest rates than U.S. government bonds.

Accepted Answer

A) True 
 B)False

Question 9

Suppose a country has only a sales tax. Now suppose it replaces the sales tax with an income tax that includes a tax on interest income. This would make equilibrium

Accepted Answer

A)  interest rates and the equilibrium quantity of loanable funds rise.
B)  interest rates rise and the equilibrium quantity of loanable funds fall.
C)  interest rates fall and the equilibrium quantity of loanable funds rise.
D)  interest rates and the equilibrium quantity of loanable funds fall.E) A) and B)
F) A) and C)

Question 10

Corporations receive no proceeds from the resale of their stock.

Accepted Answer

A) True 
 B)False

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

As an alternative to selling shares of stock as a means of raising funds, a large company could, instead,

Accepted Answer

A)  invest in physical capital.
B)  use equity finance.
C)  sell bonds.
D)  purchase bonds.E) A) and B)
F) B) and C)

Question 13

What do economists call financial institutions through which savers can indirectly provide funds to borrowers?

Accepted Answer

A)  Stock markets
B)  Monetary institutions
C)  Financial markets
D)  Financial intermediariesE) A) and D)
F) C) and D)

Question 14

When economists refer to investment, they mean the purchasing of stocks and bonds and other types of saving.

Accepted Answer

A) True 
 B)False

Question 15

Consider the expressions T − G and Y − T − C. Which of the following statements is correct?

Accepted Answer

A)  Each one of these is equal to national saving.
B)  Each one of these is equal to public saving.
C)  The first of these is private saving; the second one is public saving.
D)  The first of these is public saving; the second one is private saving.E) None of the above
F) C) and D)

Question 16

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

Question 17

Mutual funds are a type of financial intermediary.

Accepted Answer

A) True 
 B)False

Question 18

Figure 26-4
This figure shows the loanable funds market for a closed economy.  ​
-Refer to Figure 26-4. Starting at point A, a change in tax laws that encouraged households to save more would likely cause the quantity of loanable funds traded to

Accepted Answer

A)  increase to $180 and the interest rate to fall to 4% (point 
D)  .
B)  increase to $180 and the interest rate to rise to 12% (point 
C)  .
C)  decrease to $60 and the interest rate to fall to 4% (point 
B)  .
D)  decrease to $60 and the interest rate to rise to 12% (point 
E)  .E) None of the above
F) A) and C)

Question 19

You hold bonds issued by the city of Sacramento, California. The interest you earn each year on these bonds

Accepted Answer

A)  is not subject to federal income tax and so these bonds pay a higher interest rate than otherwise comparable bonds issued by the U.S.government.
B)  is not subject to federal income tax and so these bonds pay a lower interest rate than otherwise comparable bonds issued by the U.S.government.
C)  is subject to federal income tax and so these bonds pay a higher interest rate than otherwise comparable bonds issued by the U.S.government.
D)  is subject to federal income tax and so these bonds pay a lower interest rate than otherwise comparable bonds issued by the U.S.government.E) B) and C)
F) B) and D)

Question 20

The financial system is important because it helps to match one person's _____ with another person's _____.

Accepted Answer

The answer of The financial system is important because it...

Exam 26: Saving, Investment, and the Financial System

When economists refer to investment, they mean the purchasing of stocks and bonds and other types of saving.

Correct AnswerverifiedShow Answer

Suppose a country has only a sales tax. Now suppose it replaces the sales tax with an income tax that includes a tax on interest income. This would make equilibrium

Correct AnswerverifiedShow Answer

Because of differences in tax treatment, municipal bonds pay a higher interest rate than do corporate bonds.

Correct AnswerverifiedShow Answer

The financial system is important because it helps to match one person's _____ with another person's _____.

Correct AnswerverifiedShow Answer

Figure 26-3 The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves. ​ -Refer to Figure 26-3. A shift of the demand curve from D1 to D2 is called

Correct AnswerverifiedShow Answer

Other things the same, corporate bonds generally feature higher interest rates than U.S. government bonds.

Correct AnswerverifiedShow Answer

In a closed economy, GDP is $1000, government purchases are $200, and consumption is $700. If the government has a budget surplus of $25, what are investment, taxes, private saving, and national saving?

Correct AnswerverifiedInvestment = $100, T...View AnswerShow Answer

Mutual funds are a type of financial intermediary.

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What do economists call financial institutions through which savers can indirectly provide funds to borrowers?

Correct AnswerverifiedShow Answer

Congress and the President allow people to make greater contributions to tax-deferred savings accounts. Which curve in the market for loanable funds would shift, which direction would it shift, what would happen to the interest rate, and what would happen to investment spending?

Correct AnswerverifiedThe supply of loanable funds w...View AnswerShow Answer

If consumers reduced their spending, what would happen to the interest rate and investment?

Correct AnswerverifiedThe interest rate wo...View AnswerShow Answer

As an alternative to selling shares of stock as a means of raising funds, a large company could, instead,

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A _____ does not engage in international trade in goods and services and it does not engage in international borrowing and lending.

Correct AnswerverifiedShow Answer

Corporations receive no proceeds from the resale of their stock.

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Long-term bonds are

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You hold bonds issued by the city of Sacramento, California. The interest you earn each year on these bonds

Correct AnswerverifiedShow Answer

Figure 26-4 This figure shows the loanable funds market for a closed economy. ​ -Refer to Figure 26-4. Starting at point A, a change in tax laws that encouraged households to save more would likely cause the quantity of loanable funds traded to

Correct AnswerverifiedShow Answer

Consider the expressions T − G and Y − T − C. Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

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The financial system is important because it helps to match one person's _ with another person's _.

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Figure 26-3 The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves. -Refer to Figure 26-3. A shift of the demand curve from D₁ to D₂ is called

Correct Answer
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Investment = $100, T...
View Answer

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The supply of loanable funds w...
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The interest rate wo...
View Answer

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Figure 26-4 This figure shows the loanable funds market for a closed economy. -Refer to Figure 26-4. Starting at point A, a change in tax laws that encouraged households to save more would likely cause the quantity of loanable funds traded to

Correct Answer
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Correct Answer
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Correct Answer
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