Macro Chapter 13

Firms become optimistic about the future and, as a result, they plan to increase their purchases of new equipment and construction of new factories

Which of the following events would shift the demand curve from D1 to D2?

In response to tax reform, households are encouraged to save more than they previously saved

Which of the following events would shift the supply curve from SL to S2?

the equality holds due to the way the variables are defined

Y= C + I + G + NX is an identity because

Private saving is positive; public saving is negative

You observe a closed economy that has a government deficit and positive investment. Which of the following is correct?

more capital and higher productivity

When a country saves a larger portion of its GDP than it did before, it will have

investment is lower than it would be if the budget were balanced

When the government runs a budget deficit

capital investment

When opening a print shop you need to buy printers, computers, furniture, and similar items. Economists call these expenditures

saver. Bond buyers may sell their bonds prior to maturity

A bond buyer is a

changes the supply of loanable funds

A budget deficit

a budget deficit makes interest rates rise

Crowding out occurs when investment declines because

and saving would decrease

If Congress increased the tax rate on interest income, investment

public saving

In a closed economy, what does (T-G) represent?

low rate of interest because of their low default risk and because the interest they pay is not subject to federal income tax

Municipal bonds pay a relatively

9500

Suppose the economy is closed and consumption is 6500, taxes are 1500, and government purchases are 2000. If national saving amounts to 1000, then what is the GDP?

$11 trillion

Suppose the economy is closed with national saving of $2 trillion, consumption of $8 trillion, and government purchases of $1 trillion. What it GDP?

demand for existing shares of the stock and the price will both fall

Suppose the government finds a major defect in one of the company's products and demands that the product be taken off the market. We would expect that the

term

The length of time until a bond matures is called the

match one person's saving with another person's investment.

The primary economic function of the financial system is to

household spending that is investment rather than consumption

The purchase of a new house is the one form of

fell during the late 1990s

The ratio of debt to GDP in the United States

trade with other economies

A closed economy does not

reduces the interest rate and raises investment

A larger budget surplus

is an institution that sells shares to the public and uses the proceeds to buy a selection of various types of stocks, bonds, or both stocks and bonds

A mutual fund

all of the above; The supply of, and the demand for, those shares determine the price per share. Each share represents ownership of 1 percent of the firm. The firm is engaging in equity finance.

If a firm sells a total of 100 shares of stock, then

runs a budget surplus

If the tax revenue of the federal government exceeds spending, then the government necessarily

national saving

In a closed economy, what remains after paying for consumption and government purchases is

financial system

Institutions that help to match one person's saving with another person's investment are collectively called the

saving, and the source of demand for loanable funds is investment

The source of the supply of loanable funds is

the bond market, and we associate the term equity finance with the stock market

We associate the term debt finance with

the quantity of loanable funds

What is measured along the horizontal axis of the graph?

sell bonds

When a large, well-known corporation wishes to borrow directly from the public, it can

is accomplished when firms sell shares of stock

By definition, equity finance