Econ Exam 4 - Final

The table contains information about Pfizer's stock. How much is Pfizer, as a company, worth? a. $200.33 billion. b. $36 billion. c. $36.22. d. $35.86.

a. $200.33 billion.

Credit constraints limit the: a. amount of money that people can borrow. b. amount of money that banks can accept as deposits. c. interest rates that banks can charge. d. amount of saving that people can make.

a. amount of money that people can borrow.

Future value is the: a. amount that your money will grow into by a future date as a result of earning interest. b. total amount of interest paid on a loan by a future date. c. sum of all present values for a portfolio of savings instruments. d. equivalent of present value divided by the real interest rate.

a. amount that your money will grow into by a future date as a result of earning interest.

A bank can make money by: a. giving you a particular interest return on your savings and then loaning out the same money at a higher rate of interest. b. storing and locking away all the deposits made by consumers. c. borrowing money from the government at 0% interest. d. giving you a particular interest return on your savings and then loaning out the same money at a lower rate of interest.

a. giving you a particular interest return on your savings and then loaning out the same money at a higher rate of interest.

The federal funds rate is the: nominal interest rate that banks pay on overnight interbank loans. b. interest rate the public pays on loans from banks. c. interest rate on loans from the Federal Reserve's discount window. d. nominal interest rate minus the inflation rate.

a. nominal interest rate that banks pay on overnight interbank loans.

What is the Federal Reserve's mandate? a. to ensure maximum employment while maintaining stable prices b. to ensure that interest rates remain low all the time c. to print as many dollars as possible without causing inflation d. to encourage inflation and raise unemployment

a. to ensure maximum employment while maintaining stable prices

Which of the scenarios represents consumption spending? a. You take out a bank loan. b. You eat at a fancy restaurant for Valentine's Day. c. Your parents pay their income taxes. d. A new hospital is constructed in your town.

b. You eat at a fancy restaurant for Valentine's Day

An initial public offering occurs when a company: a. experiences a rise in the price and demand for its stock. b. first sells stock directly to the public. c. first sells stock directly to the government. d. first opens for business and offers its goods and services for sale to the public.

b. first sells stock directly to the public.

Investment refers to: a. saving money in banks. b. spending on physical capital. c. spending on financial assets such as stocks. d. depreciation of capital stocks.

b. spending on physical capital.

Which of the following is an investment? a. Dale purchases a house that was built in 1940. b. Mary buys $4,000 worth of Alibaba stock. c. Marios builds a new house. d. Cameron saves $400 in his savings account.

c. Marios builds a new house.

How is monetary policy different from fiscal policy? a. There is no difference between the two policies. b. Monetary policy is determined by the president, whereas fiscal policy is determined by the chair of the Federal Reserve. c. Monetary policy adjusts interest rates, whereas fiscal policy adjusts government spending and taxes. d. Monetary policy focuses on correcting inflation, whereas fiscal policy focuses on unemployment.

c. Monetary policy adjusts interest rates, whereas fiscal policy adjusts government spending and taxes.

An excise tax is a tax on: a. purchases that is typically a percentage of the purchase price of goods and services. b. luxury goods and services. c. a specific product. d. imports.

c. a specific product.

A mutual fund is a fund that: a. buys a variety of assets, including land and precious metals, for companies. b. is owned by the government. c. buys a portfolio of stocks and bonds on your behalf. d. consists of only international assets.

c. buys a portfolio of stocks and bonds on your behalf.

Depreciation refers to the: a. spending by a business on new capital assets. b. fall in the price of output that the business produces. c. decline in capital due to wear and tear, obsolescence, accidental damage, and aging. d. decline in the quality of output produced by a business.

c. decline in capital due to wear and tear, obsolescence, accidental damage, and aging.

The loanable funds market is the market for: a. wholesale goods and services. b. machines. c. funds used to buy, rent, or build capital. d. retail goods and services.

c. funds used to buy, rent, or build capital

Discretionary spending is spending that: a. supports programs that do not get determined annually but instead are set in law. b. includes all state and local government spending. c. is appropriated by Congress annually. d. includes all federal government spending.

c. is appropriated by Congress annually.

Mandatory spending is spending that: a. includes all state and local government spending. b. is appropriated by Congress annually. c. includes all federal government spending. d. supports programs that do not get determined annually but instead are set in law.

d. supports programs that do not get determined annually but instead are set in law.

Forward guidance occurs when the Federal Reserve: a. provides information about current monetary policy in order to influence expectations about future interest rates. b. provides information about the future course of monetary policy in order to influence expectations about future interest rates. c. carries out open market operations to influence future interest rates. d. follows the same future course of monetary policy that it has been following in the past.

b. provides information about the future course of monetary policy in order to influence expectations about future interest rates.

In Canada, all the provinces provide health care to all citizens and permanent residents. This is an example of: a. crowding out. b. taxes. c. social insurance. d. an item that counts toward GDP.

c. social insurance.

The three major pillars of the financial sector are the: a. stock market, the labor market, and the bond market. b. banks, the goods market, and the labor market. c. stock market, the bond market, and the banks. d. foreign exchange market, the bond market, and the government.

c. stock market, the bond market, and the banks.

The liquidity of an asset is defined as the: a. ability to index the asset's returns to the inflation rate. b. ability to predict the future cash flow of the asset. c. risk that if you need to sell the asset quickly, you may not be able to get a good price for it. d. ability to quickly and easily convert the asset to cash, with little or no loss in value.

d. ability to quickly and easily convert the asset to cash, with little or no loss in value.

Equilibrium in the loanable funds market determines the: a. point where there is excess demand for loanable funds. b. up-front cost of capital. c. amount of inventories in an economy. d. equilibrium real interest rate.

d. equilibrium real interest rate.

The slope of the consumption function is the: a. marginal propensity to import. b. marginal propensity to invest. c. average level of consumption over time. d. marginal propensity to consume.

d. marginal propensity to consume.