Chapter 26 practice test
if we were to change the interpretation of the term loanable funds in such a way that government budget deficits would affect the demand for loanable funds rather Thant he supply of loanable funds then
we would be making only a semantic change in how we analyze the effects of government budget deficit.T eh interest are changes would still be the same
a larger budget
deficit raises the interest rate and reduces investment
retained earnings are
earnings of a company that are not paid out to stockholders.
The purchase of a new house is the one form of
household spending that is investment rather than consumption
Municipal bonds pay a relatively
low rate of interest because of their low default risk and because the interest they pay is not subject to federal income tax.
compared to short term bonds, other things the same, long term bonds generally have
more risk and so therapy higher interest rates
People who buy stock in a corporation such as General Electric become
part owners of General Electric, so the benefits of holding the stock depend on General Electrics profits
A larger budget surplus
reduces the interest rate and raises investment
the source of the supply go the loanable fund is
saving, and the source of the demand for loanable funds is investment
in the loanable funds market, an increase in an investment tax credit would create a
shortage at the former equilibrium interest rate. This shortage would lead to a rise in the interest rate
Suppose a government that taxed all interest income changed its tax law so that the first 5,000 if a taxpayers interest income was tax free. This would shift the
supply of loanable funds to the right, causing interest rate to fall
what is measured along the vertical axis of the graph
the nominal interest rate
what is measured along the horizontal axis of the graph
the quantity of loanable funds
a policy that induces people to save more shifts
the supply of loanable funds and reduces interest rates.
the prices of stock traded on exchanges are determined by
the supply of, and demand for, the stock
Lacey, a financial advisor, has told her clients the following things. Which of her statements is not correct
"If you purchase a bond, you must hold it until matures"
which of the following is correct
In a closed economy, equilibrium in the market for loanable funds occurs where saving = investment.
which of the following would a macroeconomist consider as investment
Mariah builds a NEW coffee shop
which of the following is not correct
Purchases of capital goods are excluded from GDP.
when the government runs
a budget deficit, investment is lower than it would be if the budget were balanced
a shift of the supply curve to the left is called
a decrease in the supply of loanable funds
Which of the following would be included as investment in the GDP accounts
a firm increases its capital stock
A checking deposit functions as
a medium of exchange and as a store of value.
According to the loanable funds model, which of the following events would result in higher interest rates and greater saving?
congress passes a reform of the tax laws that encourage greater investments
Which of the following lists correctly identifies the four expenditure categories pf GDP
consumption, governemnt purchases, investment, net-exports