Chapter 13

d

If Congress instituted an investment tax credit, the interest rate would a. rise and saving would fall. b. fall and saving would rise. c. fall and saving would fall. d. rise and saving would rise.

c

If a reform of the tax laws encourages greater saving, the result would be a. higher interest rates and less investment. b. lower interest rate and less investment. c. lower interest rates and greater investment. d. higher interest rates and greater investment.

d

If the quantity of loanable funds supplied exceeds the quantity of loanable funds demanded, a. there is a surplus and the interest rate is below the equilibrium level. b. there is a shortage and the interest rate is above the equilibrium level. c. there is a shortage and the interest rate is below the equilibrium level. d. there is a surplus and the interest rate is above the equilibrium level.

a

In 2009, the U.S. government's budget deficit increased substantially. Other things the same, this means the a. supply of loanable funds shifted to the left. b. demand for loanable funds shifted to the left. c. demand for loanable funds shifted to the right. d. supply of loanable funds shifted to the right.

d

In a closed economy, national saving equals a. investment. b. income minus the sum of consumption and government purchases. c. private saving plus public saving. d. All of the above are correct.

d

In the late summer of 2005 some regions of the country were suffering from drought. What effect would we expect this to have on the stock of companies such as John Deere that manufacture farm equipment? a. raise the supply of the existing shares of stock, causing the price to rise b. raise the supply of the existing shares of stock, causing the price to fall c. raise the demand for existing shares of the stock, causing the price to rise d. decrease the demand for existing shares of the stock, causing the price to fall

d

Melinda buys new equipment for her dental office with funds she borrowed from a bank that raised funds from depositors. Which of the following is correct? a. The depositors are investors. b. Neither Melinda nor the depositors are investors. c. Both Melinda and the depositors are investors. d. Melinda is an investor.

a

Scenario 26-1. Assume the following information for an imaginary, closed economy. GDP = $100,000; taxes = $22,000; government purchases = $25,000; national saving = $15,000. Refer to Scenario 26-1. For this economy, investment amounts to a. $15,000. b. $12,000. c. $18,000. d. $38,000.

d

Suppose a country repealed its investment tax credit. The effects of this are represented by shifting the a. demand for and the supply of loanable funds to the right. b. demand for and the supply of loanable funds to the left. c. supply of loanable funds to the right and the demand for loanable funds to the left. d. None of the above is correct.

a

Table 26-3. The following table presents information about a closed economy whose market for loanable funds is in equilibrium. Refer to Table 26-3. Determine the quantity of private saving. a. $1.6 trillion b. $0.2 trillion c. $2.6 trillion d. $1.8 trillion

a

The country of Cedarland does not trade with any other country. Its GDP is $17 billion. Its government purchases $5 billion worth of goods and services each year and collects $6 billion in taxes. Private saving in Cedarland is $5 billion. For Cedarland, a. investment is $6 billion and consumption is $6 billion. b. investment is $7 billion and consumption is $6 billion. c. investment is $6 billion and consumption is $7 billion. d. investment is $7 billion and consumption is $7 billion.

b

The country of Meditor, a small country with a closed economy, uses the merit as its currency. Recent national income statistics showed that it had GDP of $600 million merits, no government transfer payments, taxes of $150 million merits, a budget surplus of $40 billion merits, and investment of $100 billion merits. What were its consumption and government expenditures on goods and services? a. $460 million merits and $150 million merits b. $390 million merits and $110 million merits c. $310 million merits and $190 million merits d. $350 million merits and $190 million merits

d

The slope of the demand for loanable funds curve represents the a. positive relation between the real interest rate and investment. b. positive relation between the real interest rate and saving. c. negative relation between the real interest rate and saving. d. negative relation between the real interest rate and investment.

a

Camp Company had total earnings of $600 million in 2013, out of which it retained 20 percent for future investments. In 2013, its stock featured a dividend yield of 4 percent and 100 million shares were outstanding. The price-earnings ratio for Camp Company stock was a. 20. b. 25. c. 150. d. 5.

c

If Canada goes from a large budget deficit to a small budget deficit, it will a. increase private saving and so shift the supply of loanable funds right. b. increase investment and so shift the demand for loanable funds right. c. increase public saving and so shift the supply of loanable funds right. d. reduce national saving and shift the supply left.

c

Which advantage(s) do mutual funds claim to provide? a. access to the skills of professional money managers but not diversification b. diversification but not access to the skills of professional money managers c. diversification and access to the skills of professional money managers d. neither diversification nor access to the skills of professional money managers.

d

Which of the following is correct? a. The maturity of a bond refers to the amount to be paid back. b. The principal of the bond refers to the person selling the bond. c. A bond buyer cannot sell a bond before it matures. d. None of the above is correct.

b

Which of the following statements is correct? a. The interest rate that is usually reported is the interest rate that has been corrected for inflation. b. The supply of, and demand for, loanable funds depend on the real (rather than nominal) interest rate. c. If the nominal interest rate has decreased and the real interest rate has also decreased, then the inflation rate must have decreased as well. d. All of the above are correct.

a

Which of the following statements is correct? a. A general, persistent decline in stock prices may signal that the economy is about to enter a recession because low stock prices may mean that people are expecting low corporate profits. b. Expectations about the business cycle have no impact on stock prices. c. A general, persistent decline in stock prices may signal that the economy is about to enter a boom period because people will be able to buy stock for less money. d. A general, persistent decline in stock prices may signal that the economy is about to enter a recession because low stock prices mean that corporations have had low profits in the past.

c

Which of the following would be included as investment in the GDP accounts? a. the government buys goods from another country b. someone buys stock in an American company c. a firm increases its capital stock d. All of the above are correct.