Question 1

If at some interest rate desired investment is $400 billion,desired private saving is $600 billion,and the budget deficit is $300 billion,is there a surplus or a shortage in the market for loanable funds? What does this imply would happen to interest rates?

Accepted Answer

There is a...

Question 2

Figure 13-3.The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves. 
-Refer to Figure 13-3.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) All of the above
F) A) and C)

Question 3

Which of the following bond buyers did not buy the bond that best met his or her objective?

Accepted Answer

A)   Jackie wanted a bond with a high interest rate and was willing to take a lot of risk.She purchased a junk bond.
B)   Andrew wanted a bond that would allow him to legally avoid paying federal income taxes.He purchased a municipal bond.
C)   Suzy wanted to purchase a bond whose seller was unlikely to default.She purchased a bond that Standards and Poor's rated a low credit risk.
D)   Cecilia held long-term bonds rather than short-term bonds to avoid risk.E) A) and B)
F) A) and C)

Question 4

The country of Cedarland does not trade with any other country.Its GDP is $17 billion.Its government purchases $4 billion worth of goods and services each year,collects $6 billion in taxes,and provides $1 billion in transfer payments to households.Private saving in Cedarland is $4 billion.For Cedarland,

Accepted Answer

A)   investment is $6 billion and consumption is $9 billion.
B)   investment is $6 billion and consumption is $8 billion.
C)   investment is $5 billion and consumption is $8 billion.
D)   investment is $5 billion and consumption is $7 billion.E) A) and B)
F) A) and C)

Question 5

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 B)
F) A) and C)

Question 6

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

Question 7

If a firm sells a total of 100 shares of stock,then

Accepted Answer

A)   the supply of,and demand for,those shares determine the price per share.
B)   each share represents ownership of 1 percent of the firm.
C)   the firm is engaging in equity finance.
D)   All of the above are correct.E) A) and B)
F) A) and C)

Question 8

If the demand for loanable funds shifts to the right,then initially there is a

Accepted Answer

A)   surplus so the interest rate will fall.
B)   surplus so the interest rate will rise.
C)   shortage so the interest rate will fall.
D)   shortage so the interest rate will rise.E) B) and D)
F) None of the above

Question 9

Short-term bonds are generally

Accepted Answer

A)   less risky than long-term bonds and so they feature higher interest rates.
B)   less risky than long-term bonds and so they feature lower interest rates.
C)   more risky than long-term bonds and so they feature higher interest rates.
D)   more risky than long-term bonds and so they feature lower interest rates.E) A) and B)
F) A) and C)

Question 10

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

Question 11

People who buy newly issued stock in a corporation such as Crate and Barrel provide

Accepted Answer

A)   debt finance and so become part owners of Crate and Barrel.
B)   debt finance and so become creditors of Crate and Barrel.
C)   equity finance and so become part owners of Crate and Barrel.
D)   equity finance and so become creditors of Crate and Barrel.E) A) and D)
F) A) and C)

Question 12

If Huedepool Beer runs into financial difficulty,the stockholders as

Accepted Answer

A)   part owners of Huedepool are paid before bondholders get paid anything at all.
B)   part owners of Huedepool are paid after bondholders get paid.
C)   creditors of Huedepool are paid before bondholders get paid anything at all.
D)   creditors of Huedepool are paid after bondholders get paid.E) A) and B)
F) A) and C)

Question 13

If you were to start a business delivering documents,you might need to purchase cell phones,bicycles,desks,and chairs.

Accepted Answer

A)   These purchases are called capital investment.If you raise the funds to purchase them from others you are a saver.
B)   These purchases are called capital investment.If you raise the funds to purchase them from others you are a borrower.
C)   These purchases are called consumption.If you raise the funds to purchase them from others you are a saver.
D)   These purchases are called consumption.If you raise the funds to purchase them from others you are a borrower.E) A) and B)
F) B) and C)

Question 14

Stock in Frozen Dreams,an ice cream manufacturer,has a price to earnings ratio of 24.Is this comparatively high or low? What are two explanations for the size of this company's price to earnings ratio?

Accepted Answer

It's price to earnings ratio i...

Question 15

Which of the following statements is correct?

Accepted Answer

A)   The expected future profitability of a corporation influences the demand for that corporation's 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)   All bonds are,by definition,perpetuities.E) All of the above
F) C) and D)

Question 16

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) All of the above
F) None of the above

Question 17

Which of the following statements is correct?

Accepted Answer

A)   The interest rate that is usually reported is the interest rate that has been corrected for inflation.
B)   The supply of,and demand for,loanable funds depend on the real (rather than nominal) interest rate.
C)   If the nominal interest rate has decreased and the real interest rate has also decreased,then the inflation rate must have decreased as well.
D)   All of the above are correct.E) A) and B)
F) C) and D)

Question 18

A bond is a

Accepted Answer

A)   financial intermediary.
B)   certificate of indebtedness.
C)   certificate of partial ownership in an enterprise.
D)   None of the above is correct.E) A) and B)
F) C) and D)

Question 19

Which of the following involves financial intermediation?

Accepted Answer

A)   a bank makes a loan
B)   a household buys stock issued by a corporation
C)   a foreign government purchases U.S.government bonds
D)   All of the above are correct.E) None of the above
F) A) and B)

Question 20

If there is a surplus of loanable funds,then

Accepted Answer

A)   the quantity demanded is greater than the quantity supplied and the interest rate will rise.
B)   the quantity demanded is greater than the quantity supplied and the interest rate will fall.
C)   the quantity supplied is greater than the quantity demanded and the interest rate will rise.
D)   the quantity supplied is greater than the quantity demanded and the interest rate will fall.E) All of the above
F) None of the above

Exam 26: Saving,investment,and the Financial System

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

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

Stock in Frozen Dreams,an ice cream manufacturer,has a price to earnings ratio of 24.Is this comparatively high or low? What are two explanations for the size of this company's price to earnings ratio?

Correct Answer
verified
It's price to earnings ratio i...
View Answer

If there is a surplus of loanable funds,then

Correct Answer
verified

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

Correct Answer
verified

If a firm sells a total of 100 shares of stock,then

Correct Answer
verified

Figure 13-3.The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves. -Refer to Figure 13-3.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
verified

Which of the following involves financial intermediation?

Correct Answer
verified

When the government runs a budget deficit,

Correct Answer
verified

Which of the following statements is correct?

Correct Answer
verified

If you were to start a business delivering documents,you might need to purchase cell phones,bicycles,desks,and chairs.

Correct Answer
verified

Short-term bonds are generally

Correct Answer
verified

If the demand for loanable funds shifts to the right,then initially there is a

Correct Answer
verified

If at some interest rate desired investment is $400 billion,desired private saving is $600 billion,and the budget deficit is $300 billion,is there a surplus or a shortage in the market for loanable funds? What does this imply would happen to interest rates?

Correct Answer
verified
There is a...
View Answer

If Huedepool Beer runs into financial difficulty,the stockholders as

Correct Answer
verified

Which of the following bond buyers did not buy the bond that best met his or her objective?

Correct Answer
verified

Which of the following statements is correct?

Correct Answer
verified

People who buy newly issued stock in a corporation such as Crate and Barrel provide

Correct Answer
verified

Correct Answer
verified

A bond is a

Correct Answer
verified

Exam 26: Saving,investment,and the Financial System

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

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

Stock in Frozen Dreams,an ice cream manufacturer,has a price to earnings ratio of 24.Is this comparatively high or low? What are two explanations for the size of this company's price to earnings ratio?

Correct AnswerverifiedIt's price to earnings ratio i...View AnswerShow Answer

If there is a surplus of loanable funds,then

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If a firm sells a total of 100 shares of stock,then

Correct AnswerverifiedShow Answer

Figure 13-3.The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves. -Refer to Figure 13-3.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

Which of the following involves financial intermediation?

Correct AnswerverifiedShow Answer

When the government runs a budget deficit,

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

If you were to start a business delivering documents,you might need to purchase cell phones,bicycles,desks,and chairs.

Correct AnswerverifiedShow Answer

Short-term bonds are generally

Correct AnswerverifiedShow Answer

If the demand for loanable funds shifts to the right,then initially there is a

Correct AnswerverifiedShow Answer

If at some interest rate desired investment is $400 billion,desired private saving is $600 billion,and the budget deficit is $300 billion,is there a surplus or a shortage in the market for loanable funds? What does this imply would happen to interest rates?

Correct AnswerverifiedThere is a...View AnswerShow Answer

If Huedepool Beer runs into financial difficulty,the stockholders as

Correct AnswerverifiedShow Answer

Which of the following bond buyers did not buy the bond that best met his or her objective?

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

People who buy newly issued stock in a corporation such as Crate and Barrel provide

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A bond is a

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
It's price to earnings ratio i...
View Answer

Correct Answer
verified

Correct Answer
verified

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
verified
There is a...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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