Question 1

If the budget deficit increases then

Accepted Answer

A)   saving and the interest rate rise
B)   saving rises and the interest rate falls
C)   saving falls and the interest rate rises
D)   saving and the interest rate fallsE) A) and B)
F) All of the above

Question 2

ABC Co. sells newly issued bonds. JLG Co. sells newly issued stocks. Which company is raising funds in financial markets?

Accepted Answer

A)   only ABC
B)   only JLG
C)   both ABC and JLG
D)   neither ABC nor JLGE) B) and C)
F) All of the above

Question 3

The final element of a financial crisis is

Accepted Answer

A)   an economic downturn.
B)   a decline in confidence in financial institutions.
C)   declining prices of real estate or other assets.
D)   a vicious circle.E) A) and D)
F) All of the above

Question 4

Which of the following is both a financial institution and a financial intermediary?

Accepted Answer

A)   banks
B)   stock exchanges
C)   the bond market
D)   All of the above are correct.E) A) and B)
F) B) and D)

Question 5

In the Coen Brothers' movie The Hudsucker Proxy the board of directors picks someone to run the company who they believe will make poor decisions. If things turn out as they plan,

Accepted Answer

A)   the price of a share of stock in the Hudsucker corporation should decline as the demand for shares falls.
B)   the price of a share of stock in the Hudsucker corporation should rise as the demand for shares rises.
C)   the price of a share of stock in the Hudsucker corporation should decline as the supply of existing shares falls.
D)   the price of a share of stock in the Hudsucker corporation should rise as the supply of existing shares rises.E) A) and B)
F) A) and C)

Question 6

Mutual funds are a type of financial intermediary.

Accepted Answer

A) True 
 B)False

Question 7

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 supply curve from S1 to S2 is called

Accepted Answer

A)   an increase in the supply of loanable funds.
B)   an increase in the quantity of loanable funds supplied.
C)   a decrease in the supply of loanable funds.
D)   a decrease in the quantity of loanable funds supplied.E) A) and B)
F) A) and C)

Question 8

If the demand for loanable funds shifts to the right, then initially there is a

Accepted Answer

A)   surplus so the interest rate will fall.
B)   surplus so the interest rate will rise.
C)   shortage so the interest rate will fall.
D)   shortage so the interest rate will rise.E) None of the above
F) All of the above

Question 9

The number of shares of Biggie Corporation stock outstanding in 2013 was 100 million. In 2013, Biggie stock paid a dividend of $2.50 per share and its dividend yield was 2 percent. If the price­earnings ratio is 20, then Biggie's total earnings in 2013 amounted to

Accepted Answer

A)   $15.6 million.
B)   $250 million.
C)   $160 million.
D)   $625 million.E) C) and D)
F) B) and D)

Question 10

The sale of stocks

Accepted Answer

A)   and bonds to raise money is called debt finance.
B)   and bonds to raise money is called equity finance.
C)   to raise money is called debt finance, while the sale of bonds to raise funds is called equity finance.
D)   to raise money is called equity finance, while the sale of bonds to raise funds is called debt finance.E) None of the above
F) B) and D)

Question 11

If there is a shortage of loanable funds, then

Accepted Answer

A)   the quantity demanded is greater than the quantity supplied and the interest rate will rise.
B)   the quantity demanded is greater than the quantity supplied and the interest rate will fall.
C)   the quantity supplied is greater than the quantity demanded and the interest rate will rise.
D)   the quantity supplied is greater than the quantity demanded and the interest rate will fall.E) A) and B)
F) None of the above

Question 12

Which of the following statements about mutual funds is correct?

Accepted Answer

A)   A mutual fund is a financial intermediary.
B)   A mutual fund acquires its funds primarily by selling shares to the public.
C)   People who buy shares from a mutual fund accept all of the risk and return associated with the mutual fund's portfolio.
D)   All of the above are correct.E) None of the above
F) C) and D)

Question 13

A particular stock pays an annual dividend of $2 per share and the annual dividend yield is 2.5 percent. The price of a share of this stock is

Accepted Answer

A)   $2.05.
B)   $5.00.
C)   $80.00
D)   $50.00.E) B) and C)
F) All of the above

Question 14

Which of the following is correct?

Accepted Answer

A)   Joan takes some of her income and buys mutual fund shares. Joan's purchase will be included in the investment category of GDP.
B)   If a share of stock in Virtual Pizza Corporation sells for $77, the earnings per share are $5, and the dividend per share is $2, then the P/E ratio is 11.
C)   In order to use equity finance, a firm must sell about equal values of stocks and bonds.
D)   None of the above is correct.E) All of the above
F) None of the above

Question 15

In a closed economy, national saving equals

Accepted Answer

A)   investment.
B)   income minus the sum of consumption and government purchases.
C)   private saving plus public saving.
D)   All of the above are correct.E) B) and C)
F) All of the above

Question 16

If the government budget deficit increases, which curve in the market for loanable funds shifts, which direction does it shift, and what happens to the interest rate?

Accepted Answer

The supply of loanab...

Question 17

If the nominal interest rate is 7 percent and the rate of inflation is 3 percent, then the real interest rate is

Accepted Answer

A)   7 percent.
B)   4 percent.
C)   3 percent.
D)   10 percent.E) A) and C)
F) C) and D)

Question 18

Bonds issued by state and local governments are called _____ bonds. Bonds issued by financially shaky corporations are called _____ bonds. Of these two, which type of bond usually pays a relatively higher interest rate?

Accepted Answer

municipal,...

Question 19

It is claimed that mutual funds have two advantages. The first is that mutual funds allow people with small amounts of money to diversify. The second is that mutual funds provide the skills of professional money managers who buy stocks they believe will be the most profitable and thereby increase the return that mutual fund depositors earn on their savings.

Accepted Answer

A)   Economists strongly agree with both claims.
B)   Economists are skeptical of both claims.
C)   Economists are skeptical of the first claim, but strongly agree with the second.
D)   Economists strongly agree with the first claim, but are skeptical of the second.E) All of the above
F) C) and D)

Question 20

Which of the following is correct?

Accepted Answer

A)   In the national income accounts, investment and private saving refer to the same thing.
B)   In a closed economy if national saving is greater than zero, then everyone must be saving.
C)   The financial system channels funds from savers to borrowers.
D)   People whose consumption exceeds their income are savers.E) B) and D)
F) All of the above

Exam 13: Saving, Investment, and the Financial System

Which of the following is both a financial institution and a financial intermediary?

Correct Answer
verified

If the government budget deficit increases, which curve in the market for loanable funds shifts, which direction does it shift, and what happens to the interest rate?

Correct Answer
verified
The supply of loanab...
View Answer

Correct Answer
verified

If the budget deficit increases then

Correct Answer
verified

ABC Co. sells newly issued bonds. JLG Co. sells newly issued stocks. Which company is raising funds in financial markets?

Correct Answer
verified

The sale of stocks

Correct Answer
verified

Bonds issued by state and local governments are called _ bonds. Bonds issued by financially shaky corporations are called _ bonds. Of these two, which type of bond usually pays a relatively higher interest rate?

Correct Answer
verified
municipal,...
View Answer

Mutual funds are a type of financial intermediary.

Correct Answer
verified

Which of the following statements about mutual funds is correct?

Correct Answer
verified

If the nominal interest rate is 7 percent and the rate of inflation is 3 percent, then the real interest rate is

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 supply curve from S1 to S2 is called

Correct Answer
verified

If the demand for loanable funds shifts to the right, then initially there is a

Correct Answer
verified

Which of the following is correct?

Correct Answer
verified

In the Coen Brothers' movie The Hudsucker Proxy the board of directors picks someone to run the company who they believe will make poor decisions. If things turn out as they plan,

Correct Answer
verified

If there is a shortage of loanable funds, then

Correct Answer
verified

A particular stock pays an annual dividend of $2 per share and the annual dividend yield is 2.5 percent. The price of a share of this stock is

Correct Answer
verified

In a closed economy, national saving equals

Correct Answer
verified

The final element of a financial crisis is

Correct Answer
verified

The number of shares of Biggie Corporation stock outstanding in 2013 was 100 million. In 2013, Biggie stock paid a dividend of $2.50 per share and its dividend yield was 2 percent. If the priceearnings ratio is 20, then Biggie's total earnings in 2013 amounted to

Correct Answer
verified

Which of the following is correct?

Correct Answer
verified

Exam 13: Saving, Investment, and the Financial System

Which of the following is both a financial institution and a financial intermediary?

Correct AnswerverifiedShow Answer

If the government budget deficit increases, which curve in the market for loanable funds shifts, which direction does it shift, and what happens to the interest rate?

Correct AnswerverifiedThe supply of loanab...View AnswerShow Answer

Correct AnswerverifiedShow Answer

If the budget deficit increases then

Correct AnswerverifiedShow Answer

ABC Co. sells newly issued bonds. JLG Co. sells newly issued stocks. Which company is raising funds in financial markets?

Correct AnswerverifiedShow Answer

The sale of stocks

Correct AnswerverifiedShow Answer

Bonds issued by state and local governments are called _____ bonds. Bonds issued by financially shaky corporations are called _____ bonds. Of these two, which type of bond usually pays a relatively higher interest rate?

Correct Answerverifiedmunicipal,...View AnswerShow Answer

Mutual funds are a type of financial intermediary.

Correct AnswerverifiedShow Answer

Which of the following statements about mutual funds is correct?

Correct AnswerverifiedShow Answer

If the nominal interest rate is 7 percent and the rate of inflation is 3 percent, then the real interest rate is

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 supply curve from S1 to S2 is called

Correct AnswerverifiedShow Answer

If the demand for loanable funds shifts to the right, then initially there is a

Correct AnswerverifiedShow Answer

Which of the following is correct?

Correct AnswerverifiedShow Answer

In the Coen Brothers' movie The Hudsucker Proxy the board of directors picks someone to run the company who they believe will make poor decisions. If things turn out as they plan,

Correct AnswerverifiedShow Answer

If there is a shortage of loanable funds, then

Correct AnswerverifiedShow Answer

A particular stock pays an annual dividend of $2 per share and the annual dividend yield is 2.5 percent. The price of a share of this stock is

Correct AnswerverifiedShow Answer

In a closed economy, national saving equals

Correct AnswerverifiedShow Answer

The final element of a financial crisis is

Correct AnswerverifiedShow Answer

The number of shares of Biggie Corporation stock outstanding in 2013 was 100 million. In 2013, Biggie stock paid a dividend of $2.50 per share and its dividend yield was 2 percent. If the price­earnings ratio is 20, then Biggie's total earnings in 2013 amounted to

Correct AnswerverifiedShow Answer

Which of the following is correct?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified
The supply of loanab...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Bonds issued by state and local governments are called _ bonds. Bonds issued by financially shaky corporations are called _ bonds. Of these two, which type of bond usually pays a relatively higher interest rate?

Correct Answer
verified
municipal,...
View 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

The number of shares of Biggie Corporation stock outstanding in 2013 was 100 million. In 2013, Biggie stock paid a dividend of $2.50 per share and its dividend yield was 2 percent. If the priceearnings ratio is 20, then Biggie's total earnings in 2013 amounted to

Correct Answer
verified

Correct Answer
verified