Question 1

In 2009 and 2010,the federal government's budget deficit was about

Accepted Answer

A)   5 percent of GDP,and this was the highest debt-GDP ratio in U.S history.
B)   10 percent of GDP,and this was the highest debt-GDP ratio in U.S history.
C)   5 percent of GDP,and this was the highest debt-GDP ratio since World War II.
D)   10 percent of GDP,and this was the highest debt-GDP ratio since World War II.E) A) and B)
F) All of the above

Question 2

If an economy is closed and if it has no government,then

Accepted Answer

A)   national saving = 0.
B)   national saving = private saving.
C)   public saving = investment.
D)   gross domestic product = consumption.E) B) and C)
F) A) and D)

Question 3

The source of the supply of loanable funds is

Accepted Answer

A)   saving,and the source of the demand for loanable funds is investment.
B)   consumption,and the source of the demand for loanable funds is investment.
C)   investment,and the source of the demand for loanable funds is saving.
D)   the interest rate,and the source of the demand for loanable funds is saving.E) All of the above
F) A) and D)

Question 4

Which of the following is correct?

Accepted Answer

A)   In the national income accounts,investment and private saving refer to the same thing.
B)   In a closed economy if national saving is greater than zero,then everyone must be saving.
C)   The financial system channels funds from savers to borrowers.
D)   People whose consumption exceeds their income are savers.E) A) and D)
F) C) and D)

Question 5

In a closed economy,each unit of output is either consumed or invested.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following is a certificate of indebtedness?

Accepted Answer

A)   stocks and bonds
B)   stocks but not bonds
C)   bonds but not stocks
D)   neither stocks nor bondsE) A) and C)
F) A) and B)

Question 7

An increase in the budget deficit would cause a

Accepted Answer

A)   shortage of loanable funds at the original interest rate,which would lead to falling interest rates.
B)   surplus of loanable funds at the original interest rate,which would lead to rising interest rates.
C)   shortage of loanable funds at the original interest rate,which would lead to rising interest rates.
D)   surplus of loanable funds at the original interest rate,which would lead to falling interest rates.E) All of the above
F) B) and D)

Question 8

Which of the following are effects of an increased budget deficit?

Accepted Answer

A)   the supply of loanable funds does not change; a higher interest rate reduces private saving
B)   the supply of loanable funds does not change; a higher interest rate raises private saving
C)   at any interest rate the supply of loanable funds is less; a higher interest rate reduces private saving
D)   at any interest rate the supply of loanable funds is less; a higher interest rate raises private savingE) None of the above
F) All of the above

Question 9

Suppose the market for loanable funds is in equilibrium.Given the numbers below,determine the quantity of loanable funds demanded. GDP
$200 billion
Consumption
$130 billion
Taxes Net of Transfers
$30 billion
Government Spending
$40 billion

Accepted Answer

A)   $30 billion
B)   $25 billion
C)   $20 billion
D)   $15 billionE) A) and B)
F) B) and C)

Question 10

A certificate of indebtedness that specifies the obligations of the borrower to the holder is called a

Accepted Answer

A)   bond.
B)   stock.
C)   mutual fund.
D)   All of the above are correct.E) A) and B)
F) A) and C)

Question 11

When the government runs a budget deficit,

Accepted Answer

A)   interest rates are lower than they would be if the budget were balanced.
B)   national saving is higher than it would be if the budget were balanced.
C)   investment is lower than it would be if the budget were balanced.
D)   All of the above are correct.E) A) and D)
F) A) and C)

Question 12

Figure 18-4.On the horizontal axis of the graph,L represents the quantity of loanable funds in billions of dollars. 
-Refer to Figure 18-4.The position and/or slope of the Supply curve are influenced by

Accepted Answer

A)   the level of public saving.
B)   the level of national saving.
C)   decisions made by people who have extra income they want to save and lend out.
D)   All of the above are correct.E) A) and B)
F) A) and C)

Question 13

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) A) and C)

Question 14

Bolivia had a smaller budget deficit in 2003 than in 2002.Other things the same,we would expect this reduction in the budget deficit to have

Accepted Answer

A)   increased both interest rates and investment.
B)   increased interest rates and decreased investment.
C)   decreased interest rates and increased investment.
D)   decreased both interest rates and investment.E) C) and D)
F) A) and C)

Question 15

In the language of macroeconomics,investment refers to

Accepted Answer

A)   saving.
B)   the purchase of new capital.
C)   the purchase of stocks,bonds,or mutual funds.
D)   All of the above are correct.E) A) and B)
F) B) and D)

Question 16

You are thinking of buying a bond from Bluestone Corporation.You know that this bond is long term and you know that Bluestone's business ventures are risky and uncertain.You then consider another bond with a shorter term to maturity issued by a company with good prospects and an established reputation.Which of the following is correct?

Accepted Answer

A)   The longer term would tend to make the interest rate on the bond issued by Bluestone higher,while the higher risk would tend to make the interest rate lower.
B)   The longer term would tend to make the interest rate on the bond issued by Bluestone lower,while the higher risk would tend to make the interest rate higher.
C)   Both the longer term and the higher risk would tend to make the interest rate lower on the bond issued by Bluestone.
D)   Both the longer term and the higher risk would tend to make the interest rate higher on the bond issued by Bluestone.E) A) and C)
F) B) and C)

Question 17

If the tax rate fell,holding municipal bonds would be less desirable so the interest rates on them would fall.

Accepted Answer

A) True 
 B)False

Question 18

Suppose a country had a smaller increase in debt in 2011 than it had in 2010.Then other things the same,we would expect

Accepted Answer

A)   lower interest rates and investment in 2011 than in 2010.
B)   lower interest rates and greater investment in 2011 than in 2010.
C)   higher interest rates and greater investment in 2011 than in 2010.
D)   higher interest rates and lower investment in 2011 than in 2010.E) A) and B)
F) A) and C)

Question 19

Scenario 18-1.Assume the following information for an imaginary,closed economy.
 
-Refer to Scenario 18-1.For this economy,government purchases amount to

Accepted Answer

A)   $12,000.
B)   $18,000.
C)   $28,000.
D)   $38,000.E) B) and D)
F) A) and D)

Question 20

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 B)
F) A) and C)

Exam 18: Saving,investment,and the Financial System

Suppose the market for loanable funds is in equilibrium.Given the numbers below,determine the quantity of loanable funds demanded. GDP $200 billion Consumption $130 billion Taxes Net of Transfers $30 billion Government Spending $40 billion

Correct Answer
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In a closed economy,each unit of output is either consumed or invested.

Correct Answer
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Which of the following is correct?

Correct Answer
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Which of the following are effects of an increased budget deficit?

Correct Answer
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Which of the following is a certificate of indebtedness?

Correct Answer
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Figure 18-4.On the horizontal axis of the graph,L represents the quantity of loanable funds in billions of dollars. -Refer to Figure 18-4.The position and/or slope of the Supply curve are influenced by

Correct Answer
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The source of the supply of loanable funds is

Correct Answer
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If an economy is closed and if it has no government,then

Correct Answer
verified

Suppose a country had a smaller increase in debt in 2011 than it had in 2010.Then other things the same,we would expect

Correct Answer
verified

In the language of macroeconomics,investment refers to

Correct Answer
verified

A certificate of indebtedness that specifies the obligations of the borrower to the holder is called a

Correct Answer
verified

When the government runs a budget deficit,

Correct Answer
verified

Correct Answer
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A mutual fund

Correct Answer
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Which of the following are financial intermediaries?

Correct Answer
verified

In 2009 and 2010,the federal government's budget deficit was about

Correct Answer
verified

Scenario 18-1.Assume the following information for an imaginary,closed economy. -Refer to Scenario 18-1.For this economy,government purchases amount to

Correct Answer
verified

Bolivia had a smaller budget deficit in 2003 than in 2002.Other things the same,we would expect this reduction in the budget deficit to have

Correct Answer
verified

If the tax rate fell,holding municipal bonds would be less desirable so the interest rates on them would fall.

Correct Answer
verified

An increase in the budget deficit would cause a

Correct Answer
verified

Exam 18: Saving,investment,and the Financial System

Suppose the market for loanable funds is in equilibrium.Given the numbers below,determine the quantity of loanable funds demanded. GDP $200 billion Consumption $130 billion Taxes Net of Transfers $30 billion Government Spending $40 billion

Correct AnswerverifiedShow Answer

In a closed economy,each unit of output is either consumed or invested.

Correct AnswerverifiedShow Answer

Which of the following is correct?

Correct AnswerverifiedShow Answer

Which of the following are effects of an increased budget deficit?

Correct AnswerverifiedShow Answer

Which of the following is a certificate of indebtedness?

Correct AnswerverifiedShow Answer

Figure 18-4.On the horizontal axis of the graph,L represents the quantity of loanable funds in billions of dollars. -Refer to Figure 18-4.The position and/or slope of the Supply curve are influenced by

Correct AnswerverifiedShow Answer

The source of the supply of loanable funds is

Correct AnswerverifiedShow Answer

If an economy is closed and if it has no government,then

Correct AnswerverifiedShow Answer

Suppose a country had a smaller increase in debt in 2011 than it had in 2010.Then other things the same,we would expect

Correct AnswerverifiedShow Answer

In the language of macroeconomics,investment refers to

Correct AnswerverifiedShow Answer

A certificate of indebtedness that specifies the obligations of the borrower to the holder is called a

Correct AnswerverifiedShow Answer

When the government runs a budget deficit,

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A mutual fund

Correct AnswerverifiedShow Answer

Which of the following are financial intermediaries?

Correct AnswerverifiedShow Answer

In 2009 and 2010,the federal government's budget deficit was about

Correct AnswerverifiedShow Answer

Scenario 18-1.Assume the following information for an imaginary,closed economy. -Refer to Scenario 18-1.For this economy,government purchases amount to

Correct AnswerverifiedShow Answer

Bolivia had a smaller budget deficit in 2003 than in 2002.Other things the same,we would expect this reduction in the budget deficit to have

Correct AnswerverifiedShow Answer

If the tax rate fell,holding municipal bonds would be less desirable so the interest rates on them would fall.

Correct AnswerverifiedShow Answer

An increase in the budget deficit would cause a

Correct AnswerverifiedShow Answer

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