Question 1

All else equal,when people become more optimistic about a company's future,the

Accepted Answer

A)   supply of the stock and the price will both rise.
B)   supply of the stock and the price will both fall.
C)   demand for the stock and the price will both rise.
D)   demand for the stock and the price will both fall.E) A) and D)
F) A) and C)

Question 2

The Eye of Horus incense company has $10 million in cash which it has accumulated from retained earnings.It was planning to use the money to build a new factory.Recently,the rate of interest has increased.The increase in the rate of interest should

Accepted Answer

A)   not influence the decision to build the factory because The Eye of Horus doesn't have to borrow any money.
B)   not influence the decision to build the factory because its stockholders are expecting a new factory.
C)   make it more likely that The Eye of Horus will build the factory because a higher interest rate will make the factory more valuable.
D)   make it less likely that The Eye of Horus will build the factory because the opportunity cost of the $10 million is now higher.E) All of the above
F) B) and D)

Question 3

In the loanable funds model,an increase in an investment tax credit would create a

Accepted Answer

A)   shortage at the former equilibrium interest rate.This shortage would lead to a rise in the interest rate.
B)   shortage at the former equilibrium interest rate.This shortage would lead to a fall in the interest rate.
C)   surplus at the former equilibrium interest rate.This surplus would lead to a rise in the interest rate.
D)   surplus at the former equilibrium interest rate.This surplus would lead to a fall in the interest rate.E) A) and D)
F) C) and D)

Question 4

Suppose a government that taxed all interest income changed its tax law so that the first $5,000 of a taxpayer's interest income was tax free.This would shift the

Accepted Answer

A)   supply of loanable funds to the right,causing interest rates to fall.
B)   supply of loanable funds to the left,causing interest rates to rise.
C)   demand for loanable funds to the right,causing interest rates to rise.
D)   demand for loanable funds to the left,causing interest rates to fall.E) B) and C)
F) None of the above

Question 5

Suppose the Move It! exercise chain has revenues of $45 million,accounting costs of $15 million,and currently has issued 10 million shares of stocks selling at $90 each.Compute the price-earning ratio.Show your work.Is this ratio relatively high or low? What might an increase in the price-earnings ratio indicate?

Accepted Answer

The earnings per share is ($45 million -...

Question 6

Financial intermediaries are

Accepted Answer

A)   the same as financial markets.
B)   individuals who make profits by buying a stock low and selling it high.
C)   a more general name for financial assets such as stocks,bonds,and checking accounts.
D)   financial institutions through which savers can indirectly provide funds to borrowers.E) C) and D)
F) None of the above

Question 7

Joan uses some of her income to buy mutual fund shares.A macroeconomist refers to Joan's purchase as investment.

Accepted Answer

A) True 
 B)False

Question 8

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

Accepted Answer

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

Question 9

If in a closed economy Y = $11 trillion,which of the following combinations would be consistent with national saving of $2.5 trillion?

Accepted Answer

A)   C = $8 trillion,G = $.5 trillion
B)   C = $6.5 trillion,G = $3 trillion
C)   C = $8.5 trillion,G = $2 trillion
D)   C = $9 trillion,G = $.5 trillionE) All of the above
F) C) and D)

Question 10

An increase in the budget deficit shifts the demand for loanable funds to the right.

Accepted Answer

A) True 
 B)False

Question 11

What would happen in the market for loanable funds if the government were to decrease the tax rate on interest income?

Accepted Answer

A)   The supply of and demand for loanable funds would shift right.
B)   The supply of and demand for loanable funds would shift left.
C)   The supply of loanable funds would shift right and the demand for loanable funds would shift left.
D)   None of the above is correct.E) None of the above
F) A) and C)

Question 12

Which of the following would not be a result of replacing the income tax with a consumption tax so that interest income was no longer taxed?

Accepted Answer

A)   The interest rate would decrease.
B)   Investment would decrease.
C)   The standard of living would eventually rise.
D)   The supply of loanable funds would shift right.E) C) and D)
F) All of the above

Question 13

Generally,if people begin to expect a company to have higher future profits,the price of the company's stock will begin to decrease.

Accepted Answer

A) True 
 B)False

Question 14

If the government's expenditures exceeded its receipts,it would likely

Accepted Answer

A)   lend money to a bank or other financial intermediary.
B)   borrow money from a bank or other financial intermediary.
C)   buy bonds directly from the public.
D)   sell bonds directly to the public.E) A) and B)
F) A) and C)

Question 15

If the nominal interest rate is 5 percent and the rate of inflation is 2 percent,then the real interest rate is

Accepted Answer

A)   7 percent.
B)   3 percent.
C)   2.5 percent.
D)   .4 percent.E) All of the above
F) A) and B)

Question 16

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)  an increase in the demand for loanable funds,and that increase would originate from people who had some extra income they wanted to lend. B)  an increase in the demand for loanable funds,and that increase would originate from households and firms who wish to borrow to make investments. C)  a decrease in the demand for loanable funds,and that decrease would originate from people who had some extra income they wanted to lend. D)  a decrease in the demand for loanable funds,and that decrease would originate from households and firms who wish to borrow to make investments." 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)   an increase in the demand for loanable funds,and that increase would originate from people who had some extra income they wanted to lend.
B)   an increase in the demand for loanable funds,and that increase would originate from households and firms who wish to borrow to make investments.
C)   a decrease in the demand for loanable funds,and that decrease would originate from people who had some extra income they wanted to lend.
D)   a decrease in the demand for loanable funds,and that decrease would originate from households and firms who wish to borrow to make investments.E) C) and D)
F) A) and B)

Question 17

Skyline Chili wants to finance the purchase of new equipment for its restaurants.The firm has limited internal funds,so Skyline likely will

Accepted Answer

A)   demand funds from the financial system by buying bonds.
B)   demand funds from the financial system by selling bonds.
C)   supply funds to the financial system by buying bonds.
D)   supply funds to the financial system by selling bonds.E) C) and D)
F) A) and B)

Question 18

Index funds are usually outperformed by mutual funds that are actively managed by professional money managers.

Accepted Answer

A) True 
 B)False

Question 19

Fred is considering expanding his dress shop.If interest rates rise he is

Accepted Answer

A)   less likely to expand.This illustrates why the supply of loanable funds slopes downward.
B)   more likely to expand.This illustrates why the supply of loanable funds slopes upward.
C)   less likely to expand.This illustrates why the demand for loanable funds slopes downward.
D)   more likely to expand.This illustrates why the demand for loanable funds slopes upward.E) B) and D)
F) B) and C)

Question 20

Most entrepreneurs do not have enough money of their own to start their businesses.When they acquire the necessary funds from someone else,

Accepted Answer

A)   their consumption expenditures are being financed by someone else's saving.
B)   their consumption expenditures are being financed by someone else's investment.
C)   their investments are being financed by someone else's saving.
D)   their saving is being financed by someone else's investment.E) B) and C)
F) None of the above

Exam 26: Saving, investment, and the Financial System

If the government's expenditures exceeded its receipts,it would likely

Correct Answer
verified

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
verified

Skyline Chili wants to finance the purchase of new equipment for its restaurants.The firm has limited internal funds,so Skyline likely will

Correct Answer
verified

The Eye of Horus incense company has $10 million in cash which it has accumulated from retained earnings.It was planning to use the money to build a new factory.Recently,the rate of interest has increased.The increase in the rate of interest should

Correct Answer
verified

Which of the following would not be a result of replacing the income tax with a consumption tax so that interest income was no longer taxed?

Correct Answer
verified

Generally,if people begin to expect a company to have higher future profits,the price of the company's stock will begin to decrease.

Correct Answer
verified

Suppose a government that taxed all interest income changed its tax law so that the first $5,000 of a taxpayer's interest income was tax free.This would shift the

Correct Answer
verified

If in a closed economy Y = $11 trillion,which of the following combinations would be consistent with national saving of $2.5 trillion?

Correct Answer
verified

Fred is considering expanding his dress shop.If interest rates rise he is

Correct Answer
verified

Financial intermediaries are

Correct Answer
verified

Most entrepreneurs do not have enough money of their own to start their businesses.When they acquire the necessary funds from someone else,

Correct Answer
verified

In the loanable funds model,an increase in an investment tax credit would create a

Correct Answer
verified

What would happen in the market for loanable funds if the government were to decrease the tax rate on interest income?

Correct Answer
verified

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

Correct Answer
verified

All else equal,when people become more optimistic about a company's future,the

Correct Answer
verified

An increase in the budget deficit shifts the demand for loanable funds to the right.

Correct Answer
verified

Joan uses some of her income to buy mutual fund shares.A macroeconomist refers to Joan's purchase as investment.

Correct Answer
verified

If the nominal interest rate is 5 percent and the rate of inflation is 2 percent,then the real interest rate is

Correct Answer
verified

Index funds are usually outperformed by mutual funds that are actively managed by professional money managers.

Correct Answer
verified

Correct Answer
verified
The earnings per share is ($45 million -...
View Answer

Exam 26: Saving, investment, and the Financial System

If the government's expenditures exceeded its receipts,it would likely

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

Skyline Chili wants to finance the purchase of new equipment for its restaurants.The firm has limited internal funds,so Skyline likely will

Correct AnswerverifiedShow Answer

The Eye of Horus incense company has $10 million in cash which it has accumulated from retained earnings.It was planning to use the money to build a new factory.Recently,the rate of interest has increased.The increase in the rate of interest should

Correct AnswerverifiedShow Answer

Which of the following would not be a result of replacing the income tax with a consumption tax so that interest income was no longer taxed?

Correct AnswerverifiedShow Answer

Generally,if people begin to expect a company to have higher future profits,the price of the company's stock will begin to decrease.

Correct AnswerverifiedShow Answer

Suppose a government that taxed all interest income changed its tax law so that the first $5,000 of a taxpayer's interest income was tax free.This would shift the

Correct AnswerverifiedShow Answer

If in a closed economy Y = $11 trillion,which of the following combinations would be consistent with national saving of $2.5 trillion?

Correct AnswerverifiedShow Answer

Fred is considering expanding his dress shop.If interest rates rise he is

Correct AnswerverifiedShow Answer

Financial intermediaries are

Correct AnswerverifiedShow Answer

Most entrepreneurs do not have enough money of their own to start their businesses.When they acquire the necessary funds from someone else,

Correct AnswerverifiedShow Answer

In the loanable funds model,an increase in an investment tax credit would create a

Correct AnswerverifiedShow Answer

What would happen in the market for loanable funds if the government were to decrease the tax rate on interest income?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

All else equal,when people become more optimistic about a company's future,the

Correct AnswerverifiedShow Answer

An increase in the budget deficit shifts the demand for loanable funds to the right.

Correct AnswerverifiedShow Answer

Joan uses some of her income to buy mutual fund shares.A macroeconomist refers to Joan's purchase as investment.

Correct AnswerverifiedShow Answer

If the nominal interest rate is 5 percent and the rate of inflation is 2 percent,then the real interest rate is

Correct AnswerverifiedShow Answer

Index funds are usually outperformed by mutual funds that are actively managed by professional money managers.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedThe earnings per share is ($45 million -...View AnswerShow Answer

Correct Answer
verified

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
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The earnings per share is ($45 million -...
View Answer