Econ 2, Ch 25 and 26
Lenders buy bonds and borrowers sell them. a. TRUE b. FALSE
true
The financial system coordinates investment and saving, which are important determinants of long-run real GDP.
true
We interpret the term loanable funds to mean the flow of resources available to fund private investment.
true
In 2009 and 2010, the federal government's budget deficit was about
10 percent of GDP, and this was the highest debt-GDP ratio since World War II.
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?
19 billion and $6 billion, respectively.
ABC Co. sells newly issued bonds. JLG Co. sells newly issued stocks. Which company is raising funds in financial markets?
Both
Consider 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
The identity that shows that total income and total expenditure are equal is
Y = C + I + G + NX
Although growth rates across countries vary some, rankings of countries by income remain pretty much the same over time. a. TRUE b. FALSE
false
An increase in the demand for loanable funds increases the equilibrium interest rate and decreases the equilibrium level of saving.
false
An increase in the saving rate permanently increases the growth rate of real GDP per person.
false
Foreign direct investment and domestic investment have the same effect on all measures of economic prosperity.
false
If it could increase its growth rates slightly, a country with low income would catch up with rich countries in about ten years.
false
If the tax rate fell, holding municipal bonds would be less desirable so the interest rates on them would fall.
false
Other things the same, domestic investment will increase a country's real GDP by more than foreign investment.
false
If a firm's price-earnings ratio is relatively low, then it might be an indication that
people expect the firm's earnings to fall, corporation's stock is relatively cheap, stock is undervalued
When a large, well-known corporation wishes to borrow directly from the public, it can
sell bonds
Which of the following both make the interest rate on a bond higher than otherwise?
the interest it pays is taxed and it was issued by a financially weak corporation
Alberta buys a paint sprayer and a lift for her car customizing shop. A macroeconomist would refer to these purchases as investment.
true
Countries with high population growth rates tend to have lower levels of educational attainment.
true
Credit risk refers to the probability that the issuer of a bond will fail to pay some or all of the interest or principal.
true
In 2010, income per person in the United States was about 14 times that in India.
true
International data on real GDP per person gives us a sense of how standards of living vary across countries.
true
