Macroeconomics Practice Problems Ch.8

an increase in the budget deficit is a) a decrease in public saving b) an increase in public saving c) a decrease in private savings d) an increase in private saving e) none of the above

a

an increase in the budget deficit will a) raise the real interest rate and decrease the quantity of loanable funds demanded for investment b) raise the real interest rate and increase the quantity of loanable funds demanded for investment c) lower the real interest rate and increase the quantity of loanable funds demanded for investment d) lower the real interest rate and decrease the quantity of loanable funds demanded for investment

a

which of the following sets of government policies is the most growth oriented? a) lower taxes on returns to saving, provide investment tax credits and lower the deficit b) lower taxes on the returns to saving, provide investment tax credits and increase the deficit c) increase taxes on the returns to saving, provide investment tax credits and lower the deficit d) increase taxes on the returns to saving, provide investment tax credits and increase the deficit

a

national saving (or just saving) is equal to a) private savings + public savings b) investment + consumption c) GDP - Gov. purchases d) GDP + consumption expenditures + gov. purchases e) none of the above

a) private savings + public savings

if GDP = $1,000, consumption = $600, taxes = $100 and government purchases = $200, how much is saving and investment? a) savings = 200 investment = 200 b) savings = 300 investment = 300 c) savings = 100 investment = 200 d) saving = 200 investment = 100 e) saving = 0 investment = 0

a) savings = 200, investments = 200

if Americans become more thrifty, we would expect a) the supply of loanable funds to shift to the right and the real interest rate to rise b) the supply of loanable funds to shift to the right and the real interest rate to fall c) the demand for loanable funds to shift to the right and the real interest rate to rise d) the demand for loanable funds to shift to the right and the real interest rate to fall

b

if the supply of loanable funds is very inelastic (steep), which policy would likely increase saving and investment the most? a) an investment tax credit b) a reduction in the budget deficit c) an increase in the budget deficit d) none of the above

b

Credit risk refers to a bond's a) term to maturity b) probability of default c) tax treatment d) dividend e) price-earnings ratio

b) probability of default

investment is a) the purchase of stocks and bonds b) the purchase of capital equipment and structures c) when we place our saving in the bank d) the purchase of goods and services

b) purchases of capital equipment and structures

if government spending exceeds tax collections a) there is a budget surplus b) there is a budget deficit c) private saving is positive d) public saving is positive e) none of the above is true

b) there is a budget deficit

if Americans become less concerned with future and save less at each real interest rate a) real interest rates fall and investment falls b) real interest rates falls and investment rises c) real interest rate rises and investment falls d) real interest rate rises and investment rises

c

which of the following statements is true a) a stock index is a directory used to locate information about selected stocks b) longer-term bonds tend to pay less interest than short-term bonds c) municipal bonds pay less interest than comparable corporate bonds d) mutual funds are risker than single stock purchases because the performance of so many different firms can affect the return of a mutual fund

c) municipal bonds pay less interest than comparable corporate bonds

if the public consumes $100 billion less and the government purchases $100 billion more (other things unchanging) which of the following statements is true? a) there is an increase in saving and the economy should grow more quickly b) there is a decrease in saving and the economy should grow more slowly c) saving is unchanged d) there is not enough information to determine what will happen to saving

c) saving is unchanged

an increase in the budget deficit that causes the government to increase its borrowing a) shifts the demand for loanable funds to the right b) shifts the demand for loanable funds to the left c) shifts the supply of loanable funds to the left d) shifts the supply of loanable fund to the right

c) shifts the supply of loanable funds to the right

which of the following is an example of equity finance? a) corporate bonds b) municipal bonds c) stock d) bank loan e) all of the above are equity finance

c) stock

an increase in the budget surplus a) shifts the demand for loanable funds to the right and increases the real interest rate b) shifts the demand for loanable funds to the left and reduced the real interest rate c) shifts the supply of loanable funds to the left and increases the real interest rate d) shifts the supply of loanable funds to the right and reduces the real interest rate

d

which of the following financial market securities would likely pay the highest interest rate? a) a municipal bond issued by the state of Texas b) a mutual fund with a portfolio of blue chip bonds c) a bond issued by a blue chip company d) a bond issued by a start up company

d) a bond issued by a start up company

a financial intermediary is a middle person between a) labor unions and firms b) husbands and wives c) buyers and sellers d) borrowers and lenders

d) borrowers and lenders

if an increase in the budget deficit reduces national saving and investment, we have witnessed a demonstration of a) equity finance b) the mutual fund effect c) intermediation d) crowding out

d) crowding out

if the government increases investment tax credits and reduces taxes on the return to saving at the same time a) the real interest rate should rise b) the real interest rate should fall c) the real interest rate should not change d) the impact on the real interest rate in indeterminate

d) impact on the real interest rate in indeterminate