Macroeconomics Chapter 13 True/False

An increase in the budget deficit that causes the government to increase its borrowing shifts the demand for loanable funds to the right.

False

If the government wanted to increase the rate of growth, it should raise taxes on interest and dividends to shift the supply of loanable funds to the right.

False

If the real interest rate in the loanable-funds market is temporarily held above the equilibrium rate, desired borrowing will exceed desired lending and the real interest rate will fall.

False

If you save money this week and lend it to your roommate to buy food for consumption, your act of personal saving has increased national saving.

False

People who buy stock in a firm have loaned money to the firm.

False

When a business firm sells a bond, it has engaged in equity finance.

False

The financial crisis of 2008 and 2009 began with a sharp economic downturn and a reduction in the overall demand for output.

False. It began with a decline in real estate prices.

A reduction in the budget deficit should shift the supply of loanable funds to the right, lower the real interest rate, and increase the quantity demanded of loanable funds.

True

In a closed economy, investment is always equal t saving regardless of where the saving came from -- public or private sources.

True

In a closed economy, saving is what remains after consumption expenditures and government purchases.

True

Investment is the purchase of capital equipment and structures.

True

Municipal bonds pay less interest than comparable risk corporate bons because the interest payments are tax exempt to the bondholder.

True

Mutual funds reduce a shareholder's risk by purchasing a diversified portfolio.

True

Public saving and the government's budget surplus are the same thing.

True

The quantity supplied of loanable funds is greater if real interest rates are higher.

True