Ch. 8 Homework
ABC Co. sells newly issued bonds. JLG Co. sells newly issued stocks. Which company is raising funds in financial markets?
both ABC and JLG
The slope of the demand for loanable funds curve represents the
negative relation between the real interest rate and investment
For an imaginary closed economy, T = $5,000; S = $11,000; C = $48,000; and the government is running a budget surplus of $1,000. Then
private saving= $10,000 and GDP= $63,000
In a closed economy, if Y is 10,000, T is 1,000, G is 3,000, and C is 5,000, then
the government has a budget deficit and investment is 2,000
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
the level of public saving, the level of national saving, decisions made by people who have extra income they want to save and lend out
Figure 26-2. The figure depicts a supply-of-loanable-funds curve and two demand-for-loanable-funds curves. r Q Refer to Figure 26-2. What is measured along the horizontal axis of the graph?
the quantity of loanable funds
If there is a shortage of loanable funds, then
the quantity of loanable funds demanded is greater than the quantity of loanable funds supplied and the interest rate is below equilibrium
Figure 26-1. The figure depicts a demand-for-loanable-funds curve and two supply-of-loanable-funds curves. Refer to Figure 26-1. What is measured along the vertical axis of the graph?
the real interest rate
Which of the following could explain an increase in the equilibrium interest rate and a decrease in the equilibrium quantity of loanable funds?
the supply of loanable funds shifted left
In a small closed economy investment is $50 billion and private saving is $45 billion. What are public saving and national saving?
$5 billion and $50 billion
Interest rates fall and investment falls. Which of the following could explain these changes?
The government repeals an investment tax credit
Other things the same, which bond would you expect to pay the lowest interest rate?
a bond issued by a state with a very good credit rating
Other things the same, as the maturity of a bond becomes longer, the bond will pay
a higher interest rate because it has more risk
Figure 26-3. The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves. 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
A certificate of indebtedness that specifies the obligations of the borrower to the holder is called a
Bond
