question
A bond is a financial security that represents partial ownership of a firm.
answer
False
question
A firm receives funds every time a share of its stock is sold.
answer
False
question
A person earns capital gains when they sell a financial security for more than they paid for it.
answer
True
question
Commercial banks pay higher interest rates to savers than they receive from borrowers.
answer
False
question
In macroeconomics, the purchase of stocks and bonds by households is called saving, and the purchase of new machinery and equipment by firms is called investment.
answer
True
question
In a closed economy, saving equals all of the following: investment, (Y - C - G), and (Sprivate + Spublic).
answer
True
question
The demand for loanable funds comes from savers, and the supply comes from investors.
answer
False
question
Holding all else constant, as the real interest rate decreases, the quantity of loanable funds demanded increases and the quantity of loanable funds supplied decreases.
answer
True
question
Holding all else constant, if there is a shortage of loanable funds, the real interest rate will decrease.
answer
False
question
Holding all else constant, a country's labor productivity and standard of living both increase when the country's equilibrium quantity of saving and investment increases.
answer
True
question
In a closed economy, Y = $10 trillion, C = $5 trillion, TR = $2 trillion, and G = $2 trillion. What is investment in this economy?
A. $5 trillion
B. $3 trillion
C. $2 trillion
D. Investment cannot be determined without being given a value for taxes (T).
A. $5 trillion
B. $3 trillion
C. $2 trillion
D. Investment cannot be determined without being given a value for taxes (T).
answer
B
question
Y = $12 trillion • G = $2 trillion • C = $8 trillion • TR = $2 trillion • I = $2 trillion • T = $3 trillion
What is private saving in this economy?
What is private saving in this economy?
answer
B
question
Y = $12 trillion • G = $2 trillion • C = $8 trillion • TR = $2 trillion • I = $2 trillion • T = $3 trillion
What is public saving in this economy?
What is public saving in this economy?
answer
D
question
Under which of the following circumstances would the government be running a budget deficit?
A. G = $7 trillion, T = $10 trillion, TR = $3 trillion
B. G = $5 trillion, T = $7 trillion, TR = $1 trillion
C. G = $7 trillion, T = $7 trillion, TR = $0
D. G = $5 trillion, T = $5 trillion, TR = $1 trillion
A. G = $7 trillion, T = $10 trillion, TR = $3 trillion
B. G = $5 trillion, T = $7 trillion, TR = $1 trillion
C. G = $7 trillion, T = $7 trillion, TR = $0
D. G = $5 trillion, T = $5 trillion, TR = $1 trillion
answer
D
question
Which of the following would promote economic growth by increasing the economy's equilibrium quantity of saving and investment?
A. an increase in the tax rate on interest income
B. a new tax credit for investment
C. a larger government budget deficit
D. All of the above are correct.
A. an increase in the tax rate on interest income
B. a new tax credit for investment
C. a larger government budget deficit
D. All of the above are correct.
answer
B
question
Holding all else constant, if the government introduces a tax credit for saving, then the equilibrium real interest rate will _____ and the equilibrium quantity of saving and investment will _____.
A. increase; increase
B. increase; decrease
C. decrease; increase
D. decrease; decrease
A. increase; increase
B. increase; decrease
C. decrease; increase
D. decrease; decrease
answer
C
question
Holding all else constant, if the government eliminates a tax credit for investment, then the equilibrium real interest rate will _____ and the equilibrium quantity of saving and investment will _____.
A. increase; increase B. increase; decrease C. decrease; increase D. decrease; decrease
A. increase; increase B. increase; decrease C. decrease; increase D. decrease; decrease
answer
D
question
In 2004, Cy's government ran a budget deficit, but in 2005, Cy's government had a balanced budget. Holding all else constant, this would have caused Cy's _____ loanable funds to shift _____ in 2005.
A. demand for; right B. demand for; left C. supply of; right D. supply of; left
A. demand for; right B. demand for; left C. supply of; right D. supply of; left
answer
C
question
In 2003, Hawkeye's government had a balanced budget. In 2004, Hawkeye's government ran a budget deficit. Holding all else constant, which of the following is incorrect?
A. Hawkeye's public saving was equal to zero in 2003 and less than zero in 2004.
B. Hawkeye's equilibrium quantity of saving and investment was smaller in 2003 than it was in
2004.
C. Hawkeye's equilibrium real interest rate was smaller in 2003 than it was in 2004.
D. In 2004, the sum of Hawkeye's transfer payments and government purchases was greater than
Hawkeye's tax revenue.
A. Hawkeye's public saving was equal to zero in 2003 and less than zero in 2004.
B. Hawkeye's equilibrium quantity of saving and investment was smaller in 2003 than it was in
2004.
C. Hawkeye's equilibrium real interest rate was smaller in 2003 than it was in 2004.
D. In 2004, the sum of Hawkeye's transfer payments and government purchases was greater than
Hawkeye's tax revenue.
answer
B
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