Chapter 10 - Sapling

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false

T or F: A trade balance in surplus increases the supp;y of financial capital

loan

Audrey wants to buy a new car but does not have enough cash. She gets funding from her local bank with the promise that she\'ll make monthly payments for the next three years to repay the original amount lent to her plus 6% interest.

8948

Calculate the present value. Jacob finally pays off his student loan, which had an interest rate of 5%. At the three year payment of his loan, Jacob paid $10,358 to his lender

3914

Calculate the present value. Tommy cashes a government-issued bond that he has held for five years. The bond has a rate of 4% and he receives $4,762 when he cashes it in

bond

Caleb has completed a prototype garlic peeling device that he hopes to sell to the public. Caleb decides to have his startup issue securities that offer buyers the promise to pay a specified amount of interest each year plus the principal in five years.

shift in supply

Shift in supply or demand: As a result of a stock market boom, individuals begin to feel richer and spend more while also saving less.

shift in demand

Shift in supply or demand: Calopolis, a college town in Northern California, has for many years banned the presence of fast food restaurants in city limits. As of 2012, however, the city will allow several fast food companies to open franchised locations

shift in supply

Shift in supply or demand: China decides to reduce its capital investment in the US as it expects low returns due to a weak US economy

shift in demand

Shift in supply or demand: Due to an increase in revenues after a tax hike, the United States is able to eliminate the deficit and begins to maintain a balanced budget for the first time in several decades.

increase, increase

Starbucks Coffee Company informs the public that profits this year are larger than previously predicted, due to its expansion into the retail ice cream and chocolate businesses. Demand will... Price will...

10350

Steve repays a small business loan he took out six year ago to open a deli. His rates was 6% and he makes a total repayment of $14,681

bond

a promise to pay issued by a borrower with annual interest payment and a principal payment at maturity

bank deposits

funds that are kept in a bank that must be relinquished upon the owner's request

budget surplus

if the government spends less moeny than it takes in through taxes, it will experience a...

budget balance

the difference between the amount the government collects and how much it spends is known as....

b

the fundamental relationship between savings and investment spending is that... a. investment spending promises higher financial returns than savings b. investment spending and savings are always equal c. savings will decrease as investment spending increases d. savings will increase as investment spendiong decreases

capital inflow

the net amount of funds coming into a country is the...

national savings

when budget balance is combined with all of the privately held savings from across the country, it is known as the...

b

In relation to the market for loanable funds... If the projected rate of return for a project is less than the interest rate for a loan that is necessary to complete the project, how will the borrowing business act? a. the business will take out the loan b. the business will not take out the loan c. the business will demand more funds to cover the shortfall d. the business will proceed anyway, knowing that the return is only an estimate

false

T or F: An improvement in the budget balance increases the demand for financial capital

true

T or F: An increase in private consumption may crowd out private investment

false

T or F: Lower interest rates can lead to private investment being crowded out

true

T or F: an increase in government spending can crowd out private investment

decrease, decrease

Ford Motor Company announces that it will have to decrease profit expectations for the current year, as an increase in gas prices has led many people to hold off on buying a new car. Demand will.... Price will....

c

How do mutal funds reduce risk for the average individual investor? a. by being more liquid than traditinal stocks, mutual funds reduce risk b. mutual funds provide ratinfs for lenders intended to assess risk of default c. mutual funds reduce risk through portfolio diversification d. each mutual fund guarantees a specific return on investment e. through increasing an investor's return on investment, which reduces the risk an investor would have to bear

a

How does funding from national savings differ from funding obtained from capital inflows? a. national savings are repaid domestically while capital inflows are repaid to a foreigner b. capital inflows come from domestic individuals while national savings comes from government sources c. national savings funds can be used for a wider variety of investments than capital inflows d. a dollar from national savings must be repaid while capital inflows do not have to be repaid

c

In relation to the market for loanable funds... As interest rate decreases. what happens to the quantity of loanable funds demanded? a. quantity demanded will decrease b. some borrowers will demand more funds while others will demand less c. quantity demanded will increase d. there will be no change in quantity demanded

d

In relation to the market for loanable funds... What effect will an increase in interest rates have on the quantity of loanable funds supplied? a. quantity supplied will decrease b. some lenders will offer more while others offer less c. there will be no change in quantity supplied d. quantity supplied will increase

a

In relation to the market for loanable funds... Which of the following acts as the "price in the market for loanable funds? a. interest rate b. demand c. capital d. supply

loan

Jack decides to build a chateau in the mountains of Colorado and operate it as a ski resort. He secures funding from a local commercial bank after discussing his business plan with the bank. He promises to pay back the principal plus interest over the next twenty years.

stock

Lyle and Shane start a business selling pencil sharpeners to elementary schools. Their company becomes an instant success, and they decide to allow people to start buying a small share of their company. This gives individuals who buy shares the right to vote in company decisions and a small percentage of profits.

decrease, decrease

On the same day you buy a share of Google Inc. stock, the U.S. Government announces an increase in interest rates, making bonds a more attractive option for investors. Demand will... Price...

loan-backed securities

Rand Capital Corporation, a financial industry conglomerate, pools together several hundred home mortgages and sells shares in them to groups of investors. However, many investors decide against this option because of the risk involved and the difficulty of assessing the quality of such a large number of individual mortgages.

false

T or F: if private savings is equal to private investment, then there is neither a budget surplus nor a budget deficit

a,d

There are two aspects of efficiency that the equilibrium of market for loanable funds exhibits. Select the TWO statements that characterize these two aspects of efficiency. a. Investment projects that are financed by savers have larger rates of return than projects that do not receive financing. b. Savers who lend money are willing to accept a higher minimum interest rate than potential savers who do not lend money. c. There is always a small surplus of funds in the market. d. Savers who lend money are willing to accept a lower minimum interest rate than potential savers who do not lend money. e. all potential savers lend money f. Investment project that are financed have smaller rates of return than projects not receiving financing.

stock

a share of ownership in a company

$75 million,, $75 million, d

In a small, closed economy national income (GDP) is $250.00 million for the current year. Individuals have spent $150.00 million on the consumption of goods and services. They have paid a total of $25.00 million in taxes and the government has spent $25.00 million on goods and services this year. Use this information and the national income identity to answer the following questions. 1. How much does the economy spend on investment? 2. What is national saving in the economy? 3. How are investment and national saving related in an economy like this? a. national saving is always less than investment b. investment is a componenet of national saving c. they are unrelated d. national saving equals investment

false

In regards to the savings-investment spending identity.... T or F: National budget deficits are not included in the calculation of national savings

false

In regards to the savings-investment spending identity.... T or F: Outflows can only be generated by countries with a larger GDP per capita than the contry receiving the funds

true

In regards to the savings-investment spending identity.... T or F: the budget balance can be either positive or negative

true

In regards to the savings-investment spending identity.... T or F: the national savings is the combined value of all private savings and the budget balance.

increase, increase

Due to a successful advertising campaign using the \'Pepsi Challenge\', PepsiCo announces that sales of its signature soft drink are higher than expected. Demand will... Price will...

a

Which of the following features best defines a financial intermediarty? a. a financial instituition that transforms investor funds into financial assets b. a claim by a buyer to a future payment by a seller c. an asset sold by a company which entitles the buyer to partial ownership d. a collection of stocks and bonds issued to investors

loan

agreement between a lender and a borrower


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