Question 1

In a closed economy GDP = $1400, private saving = $225, government budget deficit = $15, and government spending $25 (all numbers are in billions). Calculate national saving, taxes, and consumption.

Accepted Answer

National saving = private saving + publi...

Question 2

A decrease in taxes on interest income would increase the interest rate.

Accepted Answer

A) True 
 B)False  False

Question 3

Which of the following is both a store of value and a common medium of exchange?

Accepted Answer

A)   corporate bonds
B)   mutual funds
C)   chequing account balances
D)   a pension planE) B) and D)
F) B) and C)

Question 4

The demand for loanable funds comes from saving, and the supply of loanable funds comes from investment.

Accepted Answer

A) True 
 B)False

Question 5

Which term refers to a certificate of indebtedness that specifies the obligations of the borrower to the holder?

Accepted Answer

A)   bond
B)   stock
C)   mutual fund
D)   savings planE) None of the above
F) B) and D)

Question 6

Suppose that Parliament were to institute an investment tax credit. What would most likely happen in the market for loanable funds?

Accepted Answer

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

Question 7

Recently, the Canadian government has gone from a surplus to a deficit. Assuming other things remain the same, what does this change mean?

Accepted Answer

A)   that the supply of loanable funds shifted right
B)   that the supply of loanable funds shifted left
C)   that the demand for loanable funds shifted right
D)   that the demand for loanable funds shifted leftE) B) and C)
F) C) and D)

Question 8

If the nominal interest rate is 8 percent and the real interest rate is 2 percent, what is the inflation rate?

Accepted Answer

A)   4 percent
B)   6 percent
C)   10 percent
D)   16 percentE) None of the above
F) C) and D)

Question 9

Which expression represents national saving in a closed economy?

Accepted Answer

A)   Y - I - G - NX
B)   Y - C - G
C)   Y - I - C
D)   G + C - YE) A) and C)
F) A) and B)

Question 10

Your cousin wants to buy either stock or bonds in Holistic Healing Inc., but he isn't sure which to buy. Explain how each of his quotes below should affect his choice between the stock and the bond.
a. "I have reason to believe that the company will be announcing a new holistic remedy that has amazing health benefits."
b. "I would like to tell people I am part owner of Holistic Healing Inc."
c. "I do not want to take on much risk."

Accepted Answer

a. Presumably, when this happens, unless...

Question 11

When will a change in the tax laws that increases the supply of loanable funds have a bigger effect on investment?

Accepted Answer

A)   when the demand for loanable funds is more elastic and the supply of loanable funds is more inelastic
B)   when the demand for loanable funds is more inelastic and the supply of loanable funds is more elastic
C)   when both the demand for and supply of loanable funds are more elastic
D)   when both the demand for and supply of loanable funds are more inelasticE) A) and B)
F) None of the above

Question 12

Assuming that other things remain the same, what effect does a government budget deficit have on saving?

Accepted Answer

A)   It increases both private and national saving.
B)   It increases public saving but reduces national saving.
C)   It reduces both public and national saving.
D)   It reduces private saving but increases national saving.E) All of the above
F) A) and B)

Question 13

Which bond would you expect to pay the highest interest rate?

Accepted Answer

A)   a bond issued by the federal government
B)   a bond issued by the Royal Bank of Canada
C)   a bond issued by the province of Ontario
D)   a bond issued by a new high-tech companyE) B) and C)
F) B) and D)

Question 14

Which list of bonds is ordered from the most interest to the least interest?

Accepted Answer

A)   corporate bond, municipal bond, federal government bond
B)   corporate bond, federal government bond, municipal bond
C)   municipal bond, federal government bond, corporate bond
D)   municipal bond, corporate bond, federal government bondE) A) and D)
F) B) and D)

Question 15

What will happen to the interest on a bond as the bond's term increases?

Accepted Answer

A)   The bond will pay less interest because it has less risk.
B)   The bond will pay less interest because it has more risk.
C)   The bond will pay more interest because it has more risk.
D)   The bond will pay more interest because it has less risk.E) A) and C)
F) A) and B)

Question 16

Public saving is T - G, while private saving is Y - T - C.

Accepted Answer

A) True 
 B)False  True

Question 17

If the government's expenditures exceeded its receipts, what would it most likely do?

Accepted Answer

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

Question 18

What is public saving equal to?

Accepted Answer

A)   national saving
B)   the total amount that consumers save
C)   government spending plus transfers minus government revenue
D)   government revenue minus government spending minus transfersE) A) and D)
F) None of the above

Question 19

Patrick wants to start his own dental practice, but his expenditures exceed his income. Which statement best describes Patrick?

Accepted Answer

A)   He is a saver who demands money from the financial system.
B)   He is a saver who supplies money to the financial system.
C)   He is a borrower who demands money from the financial system.
D)   He is a borrower who supplies money to the financial system.E) C) and D)
F) A) and B)

Question 20

Rogier's income exceeds his expenditures. Which statement best describes Rogier?

Accepted Answer

A)   He is a saver who demands money from the financial system.
B)   He is a saver who supplies money to the financial system.
C)   He is a borrower who demands money from the financial system.
D)   He is a borrower who supplies money to the financial system.E) All of the above
F) C) and D)

Exam 8: Saving, Investment, and the Financial System

In a closed economy GDP = $1400, private saving = $225, government budget deficit = $15, and government spending $25 (all numbers are in billions). Calculate national saving, taxes, and consumption.

Correct Answer
verified
National saving = private saving + publi...
View Answer

A decrease in taxes on interest income would increase the interest rate.

Correct Answer
verified
False

Which of the following is both a store of value and a common medium of exchange?

Correct Answer
verified

The demand for loanable funds comes from saving, and the supply of loanable funds comes from investment.

Correct Answer
verified

Which term refers to a certificate of indebtedness that specifies the obligations of the borrower to the holder?

Correct Answer
verified

Suppose that Parliament were to institute an investment tax credit. What would most likely happen in the market for loanable funds?

Correct Answer
verified
C

Recently, the Canadian government has gone from a surplus to a deficit. Assuming other things remain the same, what does this change mean?

Correct Answer
verified

If the nominal interest rate is 8 percent and the real interest rate is 2 percent, what is the inflation rate?

Correct Answer
verified

Which expression represents national saving in a closed economy?

Correct Answer
verified

Correct Answer
verified
a. Presumably, when this happens, unless...
View Answer

When will a change in the tax laws that increases the supply of loanable funds have a bigger effect on investment?

Correct Answer
verified

Assuming that other things remain the same, what effect does a government budget deficit have on saving?

Correct Answer
verified

Which bond would you expect to pay the highest interest rate?

Correct Answer
verified

Which list of bonds is ordered from the most interest to the least interest?

Correct Answer
verified

What will happen to the interest on a bond as the bond's term increases?

Correct Answer
verified

Public saving is T - G, while private saving is Y - T - C.

Correct Answer
verified
True

If the government's expenditures exceeded its receipts, what would it most likely do?

Correct Answer
verified

What is public saving equal to?

Correct Answer
verified

Patrick wants to start his own dental practice, but his expenditures exceed his income. Which statement best describes Patrick?

Correct Answer
verified

Rogier's income exceeds his expenditures. Which statement best describes Rogier?

Correct Answer
verified

Exam 8: Saving, Investment, and the Financial System

In a closed economy GDP = $1400, private saving = $225, government budget deficit = $15, and government spending $25 (all numbers are in billions). Calculate national saving, taxes, and consumption.

Correct AnswerverifiedNational saving = private saving + publi...View AnswerShow Answer

A decrease in taxes on interest income would increase the interest rate.

Correct AnswerverifiedFalse

Which of the following is both a store of value and a common medium of exchange?

Correct AnswerverifiedShow Answer

The demand for loanable funds comes from saving, and the supply of loanable funds comes from investment.

Correct AnswerverifiedShow Answer

Which term refers to a certificate of indebtedness that specifies the obligations of the borrower to the holder?

Correct AnswerverifiedShow Answer

Suppose that Parliament were to institute an investment tax credit. What would most likely happen in the market for loanable funds?

Correct AnswerverifiedC

Recently, the Canadian government has gone from a surplus to a deficit. Assuming other things remain the same, what does this change mean?

Correct AnswerverifiedShow Answer

If the nominal interest rate is 8 percent and the real interest rate is 2 percent, what is the inflation rate?

Correct AnswerverifiedShow Answer

Which expression represents national saving in a closed economy?

Correct AnswerverifiedShow Answer

Correct Answerverifieda. Presumably, when this happens, unless...View AnswerShow Answer

When will a change in the tax laws that increases the supply of loanable funds have a bigger effect on investment?

Correct AnswerverifiedShow Answer

Assuming that other things remain the same, what effect does a government budget deficit have on saving?

Correct AnswerverifiedShow Answer

Which bond would you expect to pay the highest interest rate?

Correct AnswerverifiedShow Answer

Which list of bonds is ordered from the most interest to the least interest?

Correct AnswerverifiedShow Answer

What will happen to the interest on a bond as the bond's term increases?

Correct AnswerverifiedShow Answer

Public saving is T - G, while private saving is Y - T - C.

Correct AnswerverifiedTrue

If the government's expenditures exceeded its receipts, what would it most likely do?

Correct AnswerverifiedShow Answer

What is public saving equal to?

Correct AnswerverifiedShow Answer

Patrick wants to start his own dental practice, but his expenditures exceed his income. Which statement best describes Patrick?

Correct AnswerverifiedShow Answer

Rogier's income exceeds his expenditures. Which statement best describes Rogier?

Correct AnswerverifiedShow Answer

Correct Answer
verified
National saving = private saving + publi...
View Answer

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False

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C

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a. Presumably, when this happens, unless...
View 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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True

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