Question 1

You hold bonds issued by the state of Ohio.The interest you earn each year on these bonds

Accepted Answer

A)   is not subject to federal income tax and so these bonds pay a higher interest rate than otherwise comparable bonds issued by the U.S.government.
B)   is not subject to federal income tax and so these bonds pay a lower interest rate than otherwise comparable bonds issued by the U.S.government.
C)   is subject to federal income tax and so these bonds pay a higher interest rate than otherwise comparable bonds issued by the U.S.government.
D)   is subject to federal income tax and so these bonds pay a lower interest rate than otherwise comparable bonds issued by the U.S.government.E) A) and C)
F) C) and D)

Question 2

Identify each of the following acts as representing either saving or investment.
a.
Fred uses some of his income to buy government bonds.
b.
Julie takes some of her income and buys mutual funds.
c.
Alex purchases a new truck for his delivery business using borrowed funds.
d.
Elaine uses some of her income to buy stock in a major corporation.
e.
Henrietta hires a builder to construct a new building for her bicycle shop.

Accepted Answer

a.
Fred is saving.
b.
Julie is...

Question 3

If the tax revenue of the federal government exceeds spending,then the government necessarily

Accepted Answer

A)   runs a budget deficit.
B)   runs a budget surplus.
C)   runs a national debt.
D)   will increase taxes.E) B) and C)
F) A) and D)

Question 4

Suppose a closed economy had public saving of $3 trillion and private saving of $2 trillion.What are national saving and investment for this country?

Accepted Answer

A)   $5 trillion,$5 trillion
B)   $5 trillion,$2 trillion
C)   $1 trillion,$5 trillion
D)   $1 trillion,$2 trillionE) B) and D)
F) B) and C)

Question 5

Thomas Publishing has a share price of $28,retained earnings of $0.60 per share,and a dividend yield of 5 percent.What is its price-earnings ratio?

Accepted Answer

A)   24
B)   16
C)   14
D)   12E) A) and B)
F) All of the above

Question 6

Which of the following could explain a decrease in the equilibrium interest rate and in 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) C) and D)

Question 7

The slope of the demand for loanable funds curve represents the

Accepted Answer

A)   positive relation between the real interest rate and investment.
B)   negative relation between the real interest rate and investment.
C)   positive relation between the real interest rate and saving.
D)   negative relation between the real interest rate and saving.E) B) and C)
F) None of the above

Question 8

If the quantity of loanable funds supplied exceeds the quantity of loanable funds demanded,

Accepted Answer

A)   there is a surplus and the interest rate is above the equilibrium level.
B)   there is a surplus and the interest rate is below the equilibrium level.
C)   there is a shortage and the interest rate is above the equilibrium level.
D)   there is a shortage and the interest rate is below the equilibrium level.E) All of the above
F) B) and D)

Question 9

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

Accepted Answer

A)   The demand for loanable funds would shift left.
B)   The 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) A) and B)
F) C) and D)

Question 10

Fortunade Corporation stock has a price of $100 per share,a dividend of $1.60 per share,and retained earnings of $2.00 per share.The dividend yield on this stock is

Accepted Answer

A)   2.8 percent.
B)   2.0 percent.
C)   1.6 percent.
D)   0.4 percent.E) B) and C)
F) A) and C)

Question 11

The amount of revenue a firm receives for the sale of its products minus its costs of production as measured by its accountants is the firm's

Accepted Answer

A)   earnings.
B)   retained earnings.
C)   economic,or real,profit.
D)   dividend.E) A) and C)
F) B) and D)

Question 12

We would expect the interest rate on Bond A to be higher than the interest rate on Bond B if the two bonds have identical characteristics except that

Accepted Answer

A)   the credit risk associated with Bond A is lower than the credit risk associated with Bond B.
B)   Bond A was issued by the state of New York and Bond B was issued by the Exxon Mobil Corporation.
C)   Bond A has a term of 20 years and Bond B has a term of 2 years.
D)   All of the above are correct.E) A) and B)
F) A) and C)

Question 13

Two of the economy's most important financial intermediaries are

Accepted Answer

A)   suppliers of funds and demanders of funds.
B)   banks and the bond market.
C)   the stock market and the bond market.
D)   banks and mutual funds.E) A) and B)
F) All of the above

Question 14

Scenario 26-1.Assume the following information for an imaginary,closed economy.
GDP = $110,000;consumption = $70,000;private saving = $8,000;national
saving = $12,000.
-Refer to Scenario 26-1.This economy's government is running a

Accepted Answer

A)   budget surplus of $4,000.
B)   budget surplus of $8,000.
C)   budget deficit of $4,000.
D)   budget deficit of $8,000.E) B) and C)
F) A) and D)

Question 15

Which of the following are financial intermediaries?

Accepted Answer

A)   both banks and mutual funds
B)   banks but not mutual funds
C)   mutual funds but not banks
D)   neither banks or mutual fundsE) None of the above
F) B) and D)

Question 16

Which of the following is included in the demand for loanable funds?

Accepted Answer

A)   investment and government borrowing
B)   investment but not government borrowing
C)   government borrowing but not investment
D)   neither government borrowing nor investmentE) C) and D)
F) A) and C)

Question 17

The bond market

Accepted Answer

A)   is a financial market,whereas the stock market is a financial intermediary.
B)   is a financial intermediary,whereas the stock market is a financial market.
C)   is a financial market,as is the stock market.
D)   is a financial intermediary,as is the stock market.E) All of the above
F) A) and B)

Question 18

The old adage,"Don't put all your eggs in one basket," is very similar to a modern bit of advice concerning financial matters:

Accepted Answer

A)   "Buy low-risk bonds."
B)   "Use a medium of exchange."
C)   "Diversify."
D)   "Intermediate."E) None of the above
F) C) and D)

Question 19

It is claimed that a secondary advantage of mutual funds is that

Accepted Answer

A)   an investor can avoid investment charges and fees.
B)   they give ordinary people access to loanable funds for investing.
C)   they usually outperform stock market indexes.
D)   they give ordinary people access to the skills of professional money managers.E) B) and C)
F) A) and C)

Question 20

Camp Company had total earnings of $600 million in 2008,out of which it retained $150 million for future investments.In 2008,its stock featured a dividend yield of 3 percent and 200 million shares were outstanding.The price-earnings ratio for Camp Company stock was

Accepted Answer

A)   8.33.
B)   12.00.
C)   16.67.
D)   25.00.E) None of the above
F) A) and B)

Exam 26: Saving, investment, and the Financial System

Scenario 26-1.Assume the following information for an imaginary,closed economy. GDP = $110,000;consumption = $70,000;private saving = $8,000;national saving = $12,000. -Refer to Scenario 26-1.This economy's government is running a

Correct Answer
verified

Suppose a closed economy had public saving of $3 trillion and private saving of $2 trillion.What are national saving and investment for this country?

Correct Answer
verified

Two of the economy's most important financial intermediaries are

Correct Answer
verified

If the quantity of loanable funds supplied exceeds the quantity of loanable funds demanded,

Correct Answer
verified

Thomas Publishing has a share price of $28,retained earnings of $0.60 per share,and a dividend yield of 5 percent.What is its price-earnings ratio?

Correct Answer
verified

We would expect the interest rate on Bond A to be higher than the interest rate on Bond B if the two bonds have identical characteristics except that

Correct Answer
verified

Which of the following is included in the demand for loanable funds?

Correct Answer
verified

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

Correct Answer
verified

The amount of revenue a firm receives for the sale of its products minus its costs of production as measured by its accountants is the firm's

Correct Answer
verified

Fortunade Corporation stock has a price of $100 per share,a dividend of $1.60 per share,and retained earnings of $2.00 per share.The dividend yield on this stock is

Correct Answer
verified

The bond market

Correct Answer
verified

The old adage,"Don't put all your eggs in one basket," is very similar to a modern bit of advice concerning financial matters:

Correct Answer
verified

If the tax revenue of the federal government exceeds spending,then the government necessarily

Correct Answer
verified

It is claimed that a secondary advantage of mutual funds is that

Correct Answer
verified

You hold bonds issued by the state of Ohio.The interest you earn each year on these bonds

Correct Answer
verified

The slope of the demand for loanable funds curve represents the

Correct Answer
verified

Camp Company had total earnings of $600 million in 2008,out of which it retained $150 million for future investments.In 2008,its stock featured a dividend yield of 3 percent and 200 million shares were outstanding.The price-earnings ratio for Camp Company stock was

Correct Answer
verified

Correct Answer
verified
a.
Fred is saving.
b.
Julie is...
View Answer

Which of the following are financial intermediaries?

Correct Answer
verified

Which of the following could explain a decrease in the equilibrium interest rate and in the equilibrium quantity of loanable funds?

Correct Answer
verified

Exam 26: Saving, investment, and the Financial System

Scenario 26-1.Assume the following information for an imaginary,closed economy. GDP = $110,000;consumption = $70,000;private saving = $8,000;national saving = $12,000. -Refer to Scenario 26-1.This economy's government is running a

Correct AnswerverifiedShow Answer

Suppose a closed economy had public saving of $3 trillion and private saving of $2 trillion.What are national saving and investment for this country?

Correct AnswerverifiedShow Answer

Two of the economy's most important financial intermediaries are

Correct AnswerverifiedShow Answer

If the quantity of loanable funds supplied exceeds the quantity of loanable funds demanded,

Correct AnswerverifiedShow Answer

Thomas Publishing has a share price of $28,retained earnings of $0.60 per share,and a dividend yield of 5 percent.What is its price-earnings ratio?

Correct AnswerverifiedShow Answer

We would expect the interest rate on Bond A to be higher than the interest rate on Bond B if the two bonds have identical characteristics except that

Correct AnswerverifiedShow Answer

Which of the following is included in the demand for loanable funds?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The amount of revenue a firm receives for the sale of its products minus its costs of production as measured by its accountants is the firm's

Correct AnswerverifiedShow Answer

Fortunade Corporation stock has a price of $100 per share,a dividend of $1.60 per share,and retained earnings of $2.00 per share.The dividend yield on this stock is

Correct AnswerverifiedShow Answer

The bond market

Correct AnswerverifiedShow Answer

The old adage,"Don't put all your eggs in one basket," is very similar to a modern bit of advice concerning financial matters:

Correct AnswerverifiedShow Answer

If the tax revenue of the federal government exceeds spending,then the government necessarily

Correct AnswerverifiedShow Answer

It is claimed that a secondary advantage of mutual funds is that

Correct AnswerverifiedShow Answer

You hold bonds issued by the state of Ohio.The interest you earn each year on these bonds

Correct AnswerverifiedShow Answer

The slope of the demand for loanable funds curve represents the

Correct AnswerverifiedShow Answer

Camp Company had total earnings of $600 million in 2008,out of which it retained $150 million for future investments.In 2008,its stock featured a dividend yield of 3 percent and 200 million shares were outstanding.The price-earnings ratio for Camp Company stock was

Correct AnswerverifiedShow Answer

Correct Answerverifieda.Fred is saving.b.Julie is...View AnswerShow Answer

Which of the following are financial intermediaries?

Correct AnswerverifiedShow Answer

Which of the following could explain a decrease in the equilibrium interest rate and in the equilibrium quantity of loanable funds?

Correct AnswerverifiedShow Answer

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
a.
Fred is saving.
b.
Julie is...
View Answer

Correct Answer
verified

Correct Answer
verified