Chapter 8 test MACRO

Suppose that in a closed economy GDP is equal to 11,000, taxes are equal to 1,000, consumption equals 7,500, and government purchases equal 2,000. What is national saving?

1,500

Based on the material covered in chapter 8, recall the expressions T - G and Y - T - C. Which of the following statements is correct?

The first of these is public saving; the second one is private saving.

Which of the following expressions must be equal to national saving for a closed economy?

Y - C - G

Think about different types of bonds we studied in chapter 8. Which of these bonds will have the lowest default risk?

a bond issued by the federal government

Out of the following examples which bond will have higher interest rate due to a higher default risk?

a junk bond

Recall the market for LF from Ch. 8. If the demand for loanable funds shifts to the right, then the equilibrium interest rate

and quantity of loanable funds rises

The indirect provision of funds by savers to borrowers is accomplished by

banks and other financial intermediaries

Based on the material covered in chapter 8, the definition of a bond is a

certificate of indebtedness

Based on the material covered in chapter 8, if Miller Inc. decided to finance the purchase of new equipment for its new location, and company has limited internal funds, then Miller Inc. likely will

demand funds from the financial system by selling bonds

A national chain of restaurants wants to open several new locations. The company has limited internal funds, so it will

demand the required funds by selling bonds.

If the supply of loanable funds shifts to the right, then the equilibrium interest rate

falls and the quantity of loanable funds rises.

Based on the material covered in chapter 8, how do we call the institutions that help to match one person's saving with another person's investment

financial system

Think about the situation when a business owner is considering expanding her restaurant. If interest rates rise she is

less likely to expand. This illustrates why the demand for loanable funds slopes downward.

A larger budget surplus

reduces the interest rate and raises investment.

Based on the material covered in chapter 8, when Congress of the USA implements a policy of providing an investment tax credit for businesses, the interest rate would

rise and saving would rise

Think about the supply and demand of funds. If a company wants to borrow funds it can

supply bonds by selling them.

In a closed economy, public saving is the amount of

tax revenue that the government has left after paying for its spending.

Based on the material covered in chapter 8 recall the market for loanable funds. If the Congress decided to repeal an investment tax credit then

the demand for loanable funds would shift left

Based on the material covered in chapter 8, when the government implement policies that diminish incentives to save, then in the loanable funds market

the supply of loanable funds shifts leftward.

Based on the material covered in chapter 8, if some companies lack of funds to start their businesses and they request the necessary funds from someone else,

their investments are being financed by someone else's saving.

Please recall the market for LF. If the quantity of loanable funds supplied is greater than the quantity of loanable funds demanded,

there is a surplus and the interest rate is above the equilibrium level.

Based on the material covered in chapter 8, the sale of bonds

to raise money is called debt finance, while the sale of stocks to raise funds is called equity finance.

Based on the material covered in chapter 8 the supply of loanable funds slopes

upward because an increase in the interest rate induces people to save more.

If Congress of the United States had changed the policy to make saving more rewarding, then it is likely that the equilibrium interest rate

would be lower and the equilibrium quantity of loanable funds would be higher.

Suppose that in a closed economy GDP is equal to 15,000, government purchases are equal to 3,000, consumption equals 10,500, and taxes equal 3,500. What are private saving and public saving?

1,000 and 500, respectively