Econ chapter 13 extra questions

a financial intermediary is a middle-person between

borrowers and lenders

if an increase in the budget deficit reduces national saving and investment, we have witnessed a demonstration of

crowding out

which of the following financial market securities would likely pay the highest interest rate?

a bond issued by a start-up company

an increase in the budget deficit is...

a decrease in public saving

if the supply of loanable funds is very inelastic (steep) which policy would likely increase saving and investment the most

a reduction in the budget deficit

government policies that is the most growth oriented

lower taxes on the returns to saving, provide investment tax credits, and lower the deficit

national saving (or saving) is equal to

private saving+public saving

credit risk refers to a bond's

probability of default

an increase in the budget deficit will...

raise the real interest rate and decrease the quantity of loanable funds demanded for investment

if americans become less concerned with the future and save less at each real interest rate

real interest rates rise, and investment falls

if the public consumes $100 billion less and the government purchases $100 billion more (other things unchanging) what does this mean about saving

saving is unchanged

if GDP=$1000, consumption=$600, taxes=$100, and government purchases=$200, how much is saving and investment?

saving=$200 investment=$200

an increase in the budget deficit that causes the government to increase its borrowing

shifts the supply of loanable funds to the left

an increase in the budget surplus

shifts the supply of loanable funds to the right and reduces the real interest rate

An example of equity finance

stock

investment is...

the purchase of capital equipment and structures

if the government increases investment tax credits and reduces taxes on the return to saving at the same time

the impact on the real interest rate is indeterminate

if Americans become more thrifty, we would expect

the supply of loanable funds to shift to the right and the real interest rate to fall

if a government spending exceeds tax collections...

there is a budget deficit