ECON 1A - PS 8
In 2018, ABC Corporation had total earnings of $209 million and 73 million shares of the corporation's stock were outstanding. If the price-earnings ratio for ABC is 15, then what is the price of a share of its stock?
(209/73)(15)= 42.95
Buskin's Corporation has issued 4 million shares of stock. Its earnings were $28 million, of which it retained 40 percent. What was the dividend per share?
(28-(28*40%))/4= 4.2
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?
Budget surplus= t-g 40=150-g g= 110 y=c+i+g+nx 600= c+100+110+0 c= 390
Which of the following bond buyers did not buy the bond that best met his or her objective?
Cecilia held long-term bonds rather than short-term bonds to avoid risk
The country of Growpaw does not trade with any other country. Its GDP is $20 billion. Its government purchases $3 billion worth of goods and services each year, collects $4 billion in taxes, and provides $2 billion in transfer payments to households. Private saving in Growpaw is $4 billion. What is investment in Growpaw?
Disposable income=y-t+transfer payments c=dis. income-savings i=y-c-g 20-14-3= 3
Which of the following could explain a decrease in the equilibrium interest rate and in the equilibrium quantity of loanable funds?
The demand for loanable funds shifted leftward
Other things the same, as the maturity of a bond becomes longer, the bond will pay
a higher interest rate because it has more risk
The fact that borrowers sometimes default on their loans by declaring bankruptcy is directly related to the characteristic of a bond called
credit risk
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, investment and consumption is
i= 5+(6-5) i= 6 17= c+6+5 c=6
The country of Bienmundo does not trade with any other country. Its GDP is $30 billion. Its government purchases $5 billion worth of goods and services each year and collects $6 billion in taxes. Private saving in Bienmundo amounts to $5 billion. What are consumption and investment in Bienmundo?
i= ps+govt deficit ->(t-g) 5+(6-5)= 6 30= c+6+5 c= 19
According to the definitions of national saving and private saving, if Y, C, and G remained the same, an increase in taxes would
leave national saving unchanged and reduce private saving
Short-term bonds are generally
less risky than long-term bonds and so they feature lower interest rates
When a country saves a larger portion of its GDP than it did before, it will have
more capital and higher productivity
If an economy is closed and if it has no government, then
national saving = private saving
Other things the same, bonds are likely to have higher interest rates if they have
no tax exemptions and long terms
A high demand for a company's stock is an indication that
people are optimistic about the company's future
For an imaginary closed economy, T = $5,000; S = $11,000; C = $48,000; and the government is running a budget surplus of $1,000. Then
private saving = $10,000 and GDP = $63,000
In a closed economy, if Y and T remained the same, but G rose and C fell but by less than the rise in G, what would happen to private and national saving?
private saving would rise and national saving would fall
As an alternative to selling shares of stock as a means of raising funds, a large company could, instead,
sell bonds
Who accepts all of the risk associated with a mutual fund's portfolio of stocks and/or bonds?
the fund's shareholders
If the government institutes policies that diminish incentives to save, then in the loanable funds market
the supply of loanable funds shifts leftward
