Question 1

In examining the national income accounts of the closed economy of Nepotocracy you see that this year it had taxes of $100 billion, transfers of $40 billion, and government purchases of goods and services of $80 billion. You also notice that last year it had private saving of $50 billion and investment of $70 billion. In which year did Nepotocracy have a budget deficit of $20 billion?

Accepted Answer

A)   this year and last year
B)   this year but not last year
C)   last year but not this year
D)   neither this year nor last year

Question 2

Last quarter in a closed economy GDP was 100,000. Expenditures on capital goods such as business equipment and structures was 10,000, inventory rose 1,000, and new construction of homes was 5,000. Consumption was 65,000, taxes were 15,000. What was public saving?

Accepted Answer

A)   -4,000
B)   -5,000
C)   -14,000
D)   -15,000

Question 3

Managed funds

Accepted Answer

A)   typically have a higher rate of return and higher costs than index funds.
B)   typically have a higher rate of return and lower costs than index funds.
C)   typically have a lower rate of return and higher costs than index funds.
D)   typically have a lower rate of return and lower costs than index funds.

Question 4

To state that public saving is equal to investment, for a closed economy, is to state an accounting identity.

Accepted Answer

A) True 
 B)False

Question 5

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.

Question 6

Which of the following numbers is not associated with shares of a company's stock?

Accepted Answer

A)   term
B)   dividend
C)   price
D)   price-earnings ratio

Question 7

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.

Question 8

Net exports must equal zero for any economy

Accepted Answer

A)   that is closed.
B)   for which Y = C + I + G.
C)   for which S = Y - C - G.
D)   All of the above are correct.

Question 9

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 bonds

Question 10

The Dow Jones Industrial Average is now based on the prices of the stocks of

Accepted Answer

A)   30 major U.S. corporations.
B)   100 major U.S. corporations.
C)   500 representative U.S. corporations.
D)   1,000 representative U.S. corporations.

Question 11

The identity that shows that total income and total expenditure are equal is

Accepted Answer

A)   GDP = Y.
B)   Y = DI + T + NX.
C)   GDP = GNP - NX.
D)   Y = C + I + G + NX.

Question 12

For a closed economy, GDP is $11 trillion, consumption is $7 trillion, taxes are $3 trillion and the government runs a surplus of $1 trillion. What are private saving and national saving?

Accepted Answer

A)   $4 trillion and $1 trillion, respectively
B)   $4 trillion and $5 trillion, respectively
C)   $1 trillion and $2 trillion, respectively
D)   $1 trillion and $1 trillion, respectively

Question 13

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

Accepted Answer

A)   supply of the stock increases and the price decreases.
B)   supply of the stock decreases and the price increases.
C)   demand for the stock increases and the price increases.
D)   demand for the stock decreases and the price decreases.

Question 14

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 15

Bay City Mining, Inc. has a price of $20 a share, outstanding shares of 2.5 million, retained earnings of $1 million dollars, and a dividend yield of 2 percent. It has a price-earnings ratio of

Accepted Answer

A)   50, which is high by historical standards.
B)   50, which is low by historical standards.
C)   25, which is high by historical standards.
D)   25, which is low by historical standards.

Question 16

The term loanable funds refers to all income that is not used for consumption or government expenditures.

Accepted Answer

A) True 
 B)False

Question 17

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.

Question 18

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.

Question 19

National saving

Accepted Answer

A)   is the total income in the economy that remains after paying for consumption.
B)   is the total income in the economy that remains after paying for consumption and government purchases.
C)   is always greater than investment for a closed economy.
D)   is equal to private saving minus public saving.

Question 20

The economy's two most important financial markets are

Accepted Answer

A)   the investment market and the saving market.
B)   the bond market and the stock market.
C)   banks and the stock market.
D)   financial markets and financial institutions.

Exam 8: Saving, Investment, and the Financial System

The Dow Jones Industrial Average is now based on the prices of the stocks of

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

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

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

Which of the following numbers is not associated with shares of a company's stock?

Correct Answer
verified

Managed funds

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

Bay City Mining, Inc. has a price of $20 a share, outstanding shares of 2.5 million, retained earnings of $1 million dollars, and a dividend yield of 2 percent. It has a price-earnings ratio of

Correct Answer
verified

The identity that shows that total income and total expenditure are equal is

Correct Answer
verified

The term loanable funds refers to all income that is not used for consumption or government expenditures.

Correct Answer
verified

National saving

Correct Answer
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For a closed economy, GDP is $11 trillion, consumption is $7 trillion, taxes are $3 trillion and the government runs a surplus of $1 trillion. What are private saving and national saving?

Correct Answer
verified

To state that public saving is equal to investment, for a closed economy, is to state an accounting identity.

Correct Answer
verified

Which of the following is a certificate of indebtedness?

Correct Answer
verified

The economy's two most important financial markets are

Correct Answer
verified

Which of the following involves financial intermediation?

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

Net exports must equal zero for any economy

Correct Answer
verified

Last quarter in a closed economy GDP was 100,000. Expenditures on capital goods such as business equipment and structures was 10,000, inventory rose 1,000, and new construction of homes was 5,000. Consumption was 65,000, taxes were 15,000. What was public saving?

Correct Answer
verified

Exam 8: Saving, Investment, and the Financial System

The Dow Jones Industrial Average is now based on the prices of the stocks of

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

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

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

Which of the following numbers is not associated with shares of a company's stock?

Correct AnswerverifiedShow Answer

Managed funds

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Bay City Mining, Inc. has a price of $20 a share, outstanding shares of 2.5 million, retained earnings of $1 million dollars, and a dividend yield of 2 percent. It has a price-earnings ratio of

Correct AnswerverifiedShow Answer

The identity that shows that total income and total expenditure are equal is

Correct AnswerverifiedShow Answer

The term loanable funds refers to all income that is not used for consumption or government expenditures.

Correct AnswerverifiedShow Answer

National saving

Correct AnswerverifiedShow Answer

For a closed economy, GDP is $11 trillion, consumption is $7 trillion, taxes are $3 trillion and the government runs a surplus of $1 trillion. What are private saving and national saving?

Correct AnswerverifiedShow Answer

To state that public saving is equal to investment, for a closed economy, is to state an accounting identity.

Correct AnswerverifiedShow Answer

Which of the following is a certificate of indebtedness?

Correct AnswerverifiedShow Answer

The economy's two most important financial markets are

Correct AnswerverifiedShow Answer

Which of the following involves financial intermediation?

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

Net exports must equal zero for any economy

Correct AnswerverifiedShow Answer

Last quarter in a closed economy GDP was 100,000. Expenditures on capital goods such as business equipment and structures was 10,000, inventory rose 1,000, and new construction of homes was 5,000. Consumption was 65,000, taxes were 15,000. What was public saving?

Correct AnswerverifiedShow Answer

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