Econ ch 13

Consumption = $1,000; investment = $200; net exports = -$50;taxes = $230; private saving = $225; and national saving = $150. Refer to Scenario 26-3. This economy's government is running a

budget deficit of $75.

The slope of the demand for loanable funds curve represents the

negative relation between the real interest rate and investment.

Banks

play a role in creating an asset that people can use as a medium of exchange.

The slope of the supply of loanable funds curve represents the

positive relation between the real interest rate and saving.

In a closed economy, what does (Y - T - C) represent?

private saving

Mutual funds

provide diversification. Shareholders assume all of the risk associated with the mutual fund.

In a closed economy, what does (T - G) represent?

public saving

A U.S. Treasury bond is a

store of value, but not a common medium of exchange.

If there is a shortage of loan able funds, then

the quantity of loanable funds demanded is greater than the quantity of loanable funds supplied and the interest rate is below equilibrium.

Refer to Figure 26-5. Starting at point A, a change in tax laws that encouraged households to save more would likely cause

the quantity of loanable funds traded to increase to $125 and the interest rate fall to 5% (point D).

Refer to Figure 26-5. Starting at point A, a reduction in government spending would cause

the quantity of loanable funds traded to increase to $125 and the interest rate to fall to 5% (point D).

Refer to Figure 26-1. What is measured along the vertical axis of the graph?

the real interest rate

Refer to Figure 26-3. What, specifically, does the label on the vertical axis, i, represent?

the real interest rate

GDP = $100,000; taxes = $22,000; government purchases = $25,000; national saving = $15,000. Refer to Scenario 26-1. For this economy, consumption amounts to

$60,000.

Stock represents

All of the above are correct

Crowding out occurs when investment declines because

a budget deficit makes interest rates rise.

GDP = $100,000; taxes = $22,000; government purchases = $25,000; national saving = $15,000. Refer to Scenario 26-1. This economy's government is running a

budget deficit of $3,000.

Refer to Figure 26-2. What is measured along the horizontal axis of the graph?

the quantity of loanable funds

Consumption = $1,000; investment = $200; net exports = -$50;taxes = $230; private saving = $225; and national saving = $150. Refer to Scenario 26-3. For this economy, GDP equals

$1,455.

GDP = $5 trillion; consumption = $3.1 trillion;government purchases = $0.7 trillion; and taxes = $0.9 trillion. Refer to Scenario 26-2. For this economy, investment amounts to

$1.2 trillion.

GDP = $5 trillion; consumption = $3.1 trillion;government purchases = $0.7 trillion; and taxes = $0.9 trillion. Refer to Scenario 26-2. For this economy, national saving is equal to

$1.2 trillion.

GDP = $100,000; taxes = $22,000; government purchases = $25,000; national saving = $15,000. Refer to Scenario 26-1. For this economy, investment amounts to

$15,000.

GDP = $100,000; taxes = $22,000; government purchases = $25,000; national saving = $15,000. Refer to Scenario 26-1. For this economy, private saving amounts to

$18,000.

Consumption = $1,000; investment = $200; net exports = -$50;taxes = $230; private saving = $225; and national saving = $150. Refer to Scenario 26-3. For this economy, government purchases amount to

$305.

Refer to Figure 26-2. Which of the following events would shift the demand curve from D1 to D2?

Firms become optimistic about the future and, as a result, they plan to increase their purchases of new equipment and construction of new factories.

Refer to Figure 26-1. Which of the following events would shift the supply curve from S1 to S2?

In response to tax reform, households are encouraged to save more than they previously saved.

If you were to start a business delivering documents, you might need to purchase cell phones, bicycles, desks, and chairs.

These purchases are called capital investment. If you raise the funds to purchase them from others you are a borrower.

Refer to Figure 26-3. Which of the following movements shows the effects of the government going from a budget surplus to a budget deficit?

a movement from Point A to Point B

Refer to Figure 26-3. Which of the following movements would be consistent with the government budget going from deficit to surplus and the simultaneous enactment of an investment tax credit?

a movement from Point B to Point F

A stock index is

an average of a group of stock prices.

A bond is a

certificate of indebtedness.