ECON 201 TEST 3

If americans become more thrifty, we would expect

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

If government spending exceeds tax collections..

there is a budget defiit

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

Which of the following sets of government policies is the most growth oriented?

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

National saving (or just saving) is equal to

private saving + public saving

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

real interest rates rise, and investment falls

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

saving = $200, investment = $200

Labor force participation rate

(labor force/adult population) x 100

Unemployment rate

(number of unemployed/labor force) x 100

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

A bond issues by a start up company

Which of the following statements is true?

Municipal bonds pay less interest than comparable corporate bonds

Credit risk refers to a bonds..

Probability of default

If the public consumes $100 billion less than the government purchases $100 billion more (other things unchanging), which of the following statements is true?

Saving is unchanged

Which of the following is an example of a equity finance?

Stock

A financial intermediary is a middleperson between

borrowers and lenders

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

crowding out

An increase isn 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

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 is indeterminate

Investment is

the purchase capital equipment and structures