Macro chapter 26

An increase in the budget deficit would cause a

a. surplus of loanable funds at the original interest rate, which would lead to falling interest rates. b. shortage of loanable funds at the original interest rate, which would lead to falling interest rates. c. surplus of loanable funds at the original interest rate, which would lead to rising interest rates. d. shortage of loanable funds at the original interest rate, which would lead to rising interest rates.

Figure 26-4. On the horizontal axis of the graph, L represents the quantity of loanable funds in billions of dollars. Refer to Figure 26-4. The position and/or slope of the Supply curve are influenced by

a. the level of public saving. b. the level of national saving. c. decisions made by people who have extra income they want to save and lend out. d. All of the above are correct.

For an imaginary economy, when the real interest rate is 7 percent, the quantity of loanable funds demanded is $500 and the quantity of loanable funds supplied is $500. Currently, the nominal interest rate is 9 percent and the inflation rate is 4 percent. Currently,

a. the quantity of loanable funds supplied exceeds the quantity of loanable funds demanded, and as a result the real interest rate will fall. b. the quantity of loanable funds demanded exceeds the quantity of loanable funds supplied, and as a result the real interest rate will rise. c. the quantity of loanable funds supplied exceeds the quantity of loanable funds demanded, and as a result the real interest rate will rise. d. the market for loanable funds is in equilibrium.

If there is a surplus of loanable funds, then

a. the quantity of loanable funds supplied is greater than the quantity of loanable funds demanded and the interest rate is below equilibrium. b. the quantity of loanable funds demanded is greater than the quantity of loanable funds supplied and the interest rate is above equilibrium. c. the quantity of loanable funds demanded is greater than the quantity of loanable funds supplied and the interest rate is below equilibrium. d. the quantity of loanable funds supplied is greater than the quantity of loanable funds demanded and the interest rate is above equilibrium.

Which of the following could explain a decrease in the interest rate and an increase in the equilibrium quantity of investment?

a. the supply of loanable funds shifted right. b. the demand for loanable funds shifted left. c. the demand for loanable funds shifted right. d. the supply of loanable funds shifted left.

Suppose the U.S. offered a tax credit for firms that built new factories in the U.S. Then

a. the supply of loanable funds would shift rightward, initially creating a shortage of loanable funds at the original interest rate. b. the demand for loanable funds would shift rightward, initially creating a surplus of loanable funds at the original interest rate. c. the demand for loanable funds would shift rightward, initially creating a shortage of loanable funds at the original interest rate. d. the supply of loanable funds would shift rightward, initially creating a surplus of loanable funds at the original interest rate.

​A tech company loses a high-profile patent-infringement case against its top competitor. Which of the following is true?

a. ​Demand for the company's stock decreases, while the price of a share falls. b. ​Demand for the company's stock decreases, while the price of a share rises. c. ​Supply of the company's stock decreases, while the price of a share falls. d. ​Supply of the company's stock decreases, while the price of a share falls

Ethan purchases a new house for $170,000. Ethan's purchase of the house contributes $170,000 to which magnitude in the identity Y = C + I + G?

a. C b. I c. G d. None of the above are correct.

Borrowers can (and sometimes do) default on their loans when

a. the dividend yield on their shares of stock reaches zero. b. they declare bankruptcy. c. they convert their bonds into perpetuities. d. they cannot find enough buyers of their bonds to sell all the bonds they wish to sell.

In a closed economy, if Y , C , and T remained the same, a decrease in G would

a. reduce private saving and public saving. b. increase private saving but not public saving. c. increase public saving but not private saving. d. increase neither private nor public saving.

If the government's expenditures exceeded its receipts, it would likely

a. sell bonds directly to the public. b. buy bonds directly from the public. c. lend money to a bank or other financial intermediary. d. borrow money from a bank or other financial intermediary.

The price of a stock will rise if

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.

A government reduces its budget deficit, but at the same time people become concerned that the outlook for future government expenditures and revenues increase the chance it will default. Translation the government spends less this year (thus increasing public saving), but people are scared that the government will not be able to pay back money it owes. Which of the following is correct?

a. The reduced budget deficit will reduce interest rates in general. The increased risk of default will reduce interest rates on government bonds. b. The reduced budget deficit will raise interest rates in general. The increased risk of default will raise interest rates on government bonds. c. The reduced budget deficit will reduce interest rates in general. The increased risk of default will raise interest rates on government bonds. d. The reduced budget deficit will raise interest rates in general. The increased risk of default will reduce interest rates on government bonds.

If Congress instituted an investment tax credit causing firms to invest in more capital and machinery right now

a. it would make buying bonds more desirable, so the supply of loanable funds would shift. b. it would make buying capital goods more desirable, so the supply of loanable funds would shift. c. it would make buying capital goods more desirable, so the demand for loanable funds would shift. d. it would make buying bonds more desirable, so the demand for loanable funds would shift

A decrease in government spending and the enactment of an investment tax credit would definitely cause The following information is provided for you to logic through question above. Ex: Public Saving affects the supply curve .... Public Saving = Taxes - Government Spending ... Public Saving = T - G Public Saving TaxesG beforeG after Change in Loanable Funds +50t100t150t 0100t 100t LF goes up - Supply curve shifts to the right Investment tax credit causes firms to demand more loanable funds

a. the quantity of loanable funds traded to increase. b. the quantity of loanable funds traded to decrease. c. the interest rate to increase. d. the interest rate to decrease.

For a closed economy, GDP is $18 trillion, consumption is $13 trillion, taxes are $2 trillion and the government runs a deficit of $1 trillion. What are private saving and national saving?

a. $2 trillion and $2 trillion, respectively b. $3 trillion and $1 trillion, respectively c. $3 trillion and $2 trillion, respectively d. $2 trillion and $3 trillion, respectively

For a closed economy, GDP is $11 trillion, consumption is $7 trillion, taxes are $2.5 trillion and the government runs a surplus of $1 trillion. What are private saving and national saving?

a. $2.5 trillion and $2.5 trillion, respectively b. $1.5 trillion and $2.5 trillion, respectively c. $2.5 trillion and $1.5 trillion, respectively d. $1.5 trillion and $1.5 trillion, respectively

For a closed economy, GDP is $11 trillion, consumption is $7 trillion, taxes are $2.5 trillion and the government runs a surplus of $1 trillion. What are private saving and national saving?

a. $2.5 trillion and $2.5 trillion, respectively b. $2.5 trillion and $1.5 trillion, respectively c. $1.5 trillion and $2.5 trillion, respectively d. $1.5 trillion and $1.5 trillion, respectively

Which of the following people purchased the correct asset to meet his or her objective?

a. Michelle wanted to be a part owner of Mamma Rosa's Pizza, so she purchased a bond issued by Mamma Rosa's Pizza. b.Tim wanted a high return, even if it meant taking some risk, so he purchased stock issued by Specific Electric instead of bonds issued by Specific Electric. c. Jennifer wanted to buy equity in Honda, so she purchased bonds sold by Honda. d. All of the above are correct

Figure 26-4. On the horizontal axis of the graph, L represents the quantity of loanable funds in billions of dollars. Refer to Figure 26-4. Which of the following events could explain a shift of the demand-for-loanable-funds curve from to d1 to d2 ?

a. The tax code is reformed to encourage greater investment. b. The government starts running a budget deficit. c. The government starts running a budget surplus. d. The tax code is reformed to encourage greater saving.

All else equal, when people become more optimistic about a company's future, the

a. demand for the stock and the price will both rise. b. demand for the stock and the price will both fall. c. supply of the stock and the price will both rise. d. supply of the stock and the price will both fall.

When the government runs a budget deficit,

a. interest rates are lower than they would be if the budget were balanced. b. national saving is higher than it would be if the budget were balanced. c. investment is lower than it would be if the budget were balanced. d. All of the above are correc

The slope of the supply of loanable funds is based on the logic that an increase in interest rates

a. makes investment less attractive. b. makes saving more attractive. c. makes investment more attractive. d. makes saving less attractive.

Assume the bonds below have the same term and principal and that the state or local government that issues the municipal bond has a good credit rating. Which list has bonds correctly ordered from the one that pays the highest interest rate to the one that pays the lowest interest rate?

a. municipal bond, U.S. government bond, corporate bond b. U.S. government bond, municipal bond, corporate bond c. corporate bond, municipal bond, U.S. government bond d. corporate bond, U.S. government bond, municipal bond

World Wide Delivery Service Corporation develops a way to speed up its deliveries and reduce its costs. We would expect that this would

a. raise the supply of the existing shares of stock, causing the price to fall. b. decrease the demand for existing shares of the stock, causing the price to fall. c. raise the demand for existing shares of the stock, causing the price to rise. d. raise the supply of the existing shares of stock, causing the price to rise.