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Exam 18: Saving,investment,and the Financial System

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Question 111

Multiple Choice

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According to the definitions of national saving and private saving,if Y,C,and G remained the same,an increase in taxes would

A) raise both national saving and private saving.
B) raise national saving and reduce private saving.
C) leave national saving and private saving unchanged.
D) leave national saving unchanged and reduce private saving.

E) All of the above
F) C) and D)

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Question 112

Multiple Choice

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

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

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Question 113

Multiple Choice

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A bond buyer is a

Cassie purchases 1,000 shares of a mutual fund for $1,000.Cassie's purchase of these shares contributes $1,000 to which magnitude in the identity Y = C + I + G?

The first three elements of a financial crisis are correctly represented as taking place in the following order:

Which of the following both make the interest rate on a bond higher than otherwise?

A larger budget deficit

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

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

Other things being constant,when a firm sells new shares of stock,the

A creditor of a corporation holds

When the government goes from running a balanced budget to running a budget surplus,

The country of Yokovia does not trade with any other country.Its GDP is $20 billion.Its government collects $4 billion in taxes and pays out $3 billion to households in the form of transfer payments.Consumption equals $15 billion and investment equals $2 billion.What is public saving in Yokovia,and what is the value of the goods and services purchased by the government of Yokovia?

Table 18-2 -Refer to Table 18-2.Which company had the lowest earnings per share?

Interest rates fall and investment falls.Which of the following could explain these changes?

The nominal interest rate is the

The country of Meditor uses the merit as its currency.Recent national income statistics showed that it had GDP of $700 million merits,no government transfer payments,taxes of $210 million merits,a budget surplus of $60 billion merits,and investment of $100 billion merits.What were its consumption and government expenditures on goods and services?

Assume the bonds below have the same term and principal and that the state or local government that issues the municipal bond has a good credit rating.Which list has bonds correctly ordered from the one that pays the highest interest rate to the one that pays the lowest interest rate?

For an imaginary economy,when the real interest rate is 5 percent,the quantity of loanable funds demanded is $1,000 and the quantity of loanable funds supplied is $1,000.Currently,the nominal interest rate is 9 percent and the inflation rate is 2 percent.Currently,

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