Question 1

Using a graph representing the market for loanable funds,show and explain what happens to interest rates and investment if the government budget goes from a deficit to a surplus.

Accepted Answer

As shown in the graph below,the economy ...

Question 2

In 2008,CDZ Corporation had total earnings of $500 million and CDZ retained 30 percent of its earnings for future investments.If the price of a share of CDZ stock is $70 and if 80 million shares of its stock were outstanding,then what is the price-earnings ratio?

Accepted Answer

A)   0.14
B)   11.2
C)   16.0
D)   37.3E) None of the above
F) B) and C)

Question 3

Table 26-2
 
-Refer to Table 26-2.Which company had the highest earnings per share?

Accepted Answer

A)   Boeing Co.
B)   Eli Lilly and Co.
C)   H.J.Heinz and Co.
D)   Kellog Co.E) A) and C)
F) All of the above

Question 4

When the U.S.government is in debt during a given year,it follows that its budget is in deficit for that year.

Accepted Answer

A) True 
 B)False

Question 5

The price of a stock will rise if

Accepted Answer

A)   the managers of a stock exchange decide the price should be higher.
B)   the demand for the stock rises.
C)   the supply of the stock rises.
D)   None of the above are correct.E) All of the above
F) C) and D)

Question 6

We interpret the term loanable funds to mean the flow of resources available to fund private investment.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following is not correct?

Accepted Answer

A)   Gross domestic product is both total income in an economy and total expenditures on the economy's output of goods and services.
B)   In a closed economy net exports are zero.
C)   National saving is the sum of private saving and public saving.
D)   Purchases of capital goods are excluded from GDP.E) A) and C)
F) B) and D)

Question 8

Table 26-2
 
-Refer to Table 26-2.Which company had the lowest dollar dividend?

Accepted Answer

A)   Boeing Co.
B)   Eli Lilly and Co.
C)   H.J.Heinz and Co.
D)   Kellog Co.E) B) and D)
F) C) and D)

Question 9

Which of the following lists correctly identifies the four expenditure categories of GDP?

Accepted Answer

A)   consumption,government purchases,investment,net-exports
B)   consumption,investment,depreciation,net-exports
C)   consumption,saving,investment,depreciation,
D)   consumption,government purchases,investment,savingsE) None of the above
F) A) and D)

Question 10

Which of the following is a financial intermediary?

Accepted Answer

A)   a mutual fund
B)   the stock market
C)   a U.S.government bond
D)   a wealthy individual who regularly buys and holds large quantities of government bondsE) B) and C)
F) A) and D)

Question 11

If a reform of the tax laws encourages greater saving,the result would be

Accepted Answer

A)   higher interest rates and greater investment.
B)   higher interest rates and less investment.
C)   lower interest rates and greater investment.
D)   lower interest rate and less investment.E) C) and D)
F) None of the above

Question 12

On which of these bonds is the prospect of default most likely?

Accepted Answer

A)   a junk bond
B)   a municipal bond
C)   a U.S.government bond
D)   a corporate bond issued by General Electric CorporationE) A) and C)
F) B) and D)

Question 13

The purchase of a new house is the one form of

Accepted Answer

A)   investment that is financed by private saving rather than public saving.
B)   household spending that is not counted as part of investment in the national income accounts.
C)   household spending that is investment rather than consumption.
D)   household spending that does not contribute to GDP.E) A) and C)
F) A) and D)

Question 14

You are thinking of buying a bond from Knight Corporation.You know that this bond is long term and you know that Knight's business ventures are risky and uncertain.You then consider another bond with a shorter term to maturity issued by a company with good prospects and an established reputation.Which of the following is correct?

Accepted Answer

A)   The longer term would tend to make the interest rate on the bond issued by Knight higher,while the higher risk would tend to make the interest rate lower.
B)   The longer term would tend to make the interest rate on the bond issued by Knight lower,while the higher risk would tend to make the interest rate higher.
C)   Both the longer term and the higher risk would tend to make the interest rate lower on the bond issued by Knight.
D)   Both the longer term and the higher risk would tend to make the interest rate higher on the bond issued by Knight.E) B) and C)
F) A) and B)

Question 15

A closed economy does not

Accepted Answer

A)   trade with other economies.
B)   have free markets.
C)   allow financial intermediation.
D)   All of the above are correct.E) A) and B)
F) A) and C)

Question 16

Which of the following statements is correct?

Accepted Answer

A)   The interest rate that is usually reported is the interest rate that has been corrected for inflation.
B)   The supply of,and demand for,loanable funds depend on the real (rather than nominal) interest rate.
C)   If the nominal interest rate has decreased and the real interest rate has also decreased,then the inflation rate must have decreased as well.
D)   All of the above are correct.E) C) and D)
F) None of the above

Question 17

Mutual funds are a type of financial intermediary.

Accepted Answer

A) True 
 B)False

Question 18

According to the definitions of private and public saving,if Y,C,and G remained the same,an increase in taxes would

Accepted Answer

A)   raise both private and public saving.
B)   raise private saving and lower public saving.
C)   lower private saving and raise public saving.
D)   lower private and public saving.E) A) and B)
F) None of the above

Question 19

Table 26-1
 
-Refer to Table 26-1.Assume that the closing price was also the average price at which each stock transaction took place.What was the total dollar volume of Gillette stock traded that day?

Accepted Answer

A)   $912,840,000
B)   $91,284,000
C)   $9,128,400
D)   $912,840E) A) and C)
F) A) and D)

Question 20

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 D)
F) C) and D)

Exam 26: Saving, investment, and the Financial System

Which of the following is not correct?

Correct Answer
verified

If a reform of the tax laws encourages greater saving,the result would be

Correct Answer
verified

Table 26-2 -Refer to Table 26-2.Which company had the highest earnings per share?

Correct Answer
verified

Using a graph representing the market for loanable funds,show and explain what happens to interest rates and investment if the government budget goes from a deficit to a surplus.

Correct Answer
verified
As shown in the graph below,the economy ...
View Answer

Which of the following statements is correct?

Correct Answer
verified

In 2008,CDZ Corporation had total earnings of $500 million and CDZ retained 30 percent of its earnings for future investments.If the price of a share of CDZ stock is $70 and if 80 million shares of its stock were outstanding,then what is the price-earnings ratio?

Correct Answer
verified

A closed economy does not

Correct Answer
verified

Table 26-2 -Refer to Table 26-2.Which company had the lowest dollar dividend?

Correct Answer
verified

On which of these bonds is the prospect of default most likely?

Correct Answer
verified

Table 26-1 -Refer to Table 26-1.Assume that the closing price was also the average price at which each stock transaction took place.What was the total dollar volume of Gillette stock traded that day?

Correct Answer
verified

We interpret the term loanable funds to mean the flow of resources available to fund private investment.

Correct Answer
verified

According to the definitions of private and public saving,if Y,C,and G remained the same,an increase in taxes would

Correct Answer
verified

The purchase of a new house is the one form of

Correct Answer
verified

Mutual funds are a type of financial intermediary.

Correct Answer
verified

The price of a stock will rise if

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

Which of the following is a financial intermediary?

Correct Answer
verified

Which of the following lists correctly identifies the four expenditure categories of GDP?

Correct Answer
verified

When the U.S.government is in debt during a given year,it follows that its budget is in deficit for that year.

Correct Answer
verified

Exam 26: Saving, investment, and the Financial System

Which of the following is not correct?

Correct AnswerverifiedShow Answer

If a reform of the tax laws encourages greater saving,the result would be

Correct AnswerverifiedShow Answer

Table 26-2 -Refer to Table 26-2.Which company had the highest earnings per share?

Correct AnswerverifiedShow Answer

Using a graph representing the market for loanable funds,show and explain what happens to interest rates and investment if the government budget goes from a deficit to a surplus.

Correct AnswerverifiedAs shown in the graph below,the economy ...View AnswerShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

In 2008,CDZ Corporation had total earnings of $500 million and CDZ retained 30 percent of its earnings for future investments.If the price of a share of CDZ stock is $70 and if 80 million shares of its stock were outstanding,then what is the price-earnings ratio?

Correct AnswerverifiedShow Answer

A closed economy does not

Correct AnswerverifiedShow Answer

Table 26-2 -Refer to Table 26-2.Which company had the lowest dollar dividend?

Correct AnswerverifiedShow Answer

On which of these bonds is the prospect of default most likely?

Correct AnswerverifiedShow Answer

Table 26-1 -Refer to Table 26-1.Assume that the closing price was also the average price at which each stock transaction took place.What was the total dollar volume of Gillette stock traded that day?

Correct AnswerverifiedShow Answer

We interpret the term loanable funds to mean the flow of resources available to fund private investment.

Correct AnswerverifiedShow Answer

According to the definitions of private and public saving,if Y,C,and G remained the same,an increase in taxes would

Correct AnswerverifiedShow Answer

The purchase of a new house is the one form of

Correct AnswerverifiedShow Answer

Mutual funds are a type of financial intermediary.

Correct AnswerverifiedShow Answer

The price of a stock will rise if

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following is a financial intermediary?

Correct AnswerverifiedShow Answer

Which of the following lists correctly identifies the four expenditure categories of GDP?

Correct AnswerverifiedShow Answer

When the U.S.government is in debt during a given year,it follows that its budget is in deficit for that year.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
As shown in the graph below,the economy ...
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

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified