quiz 6

for a closed economy, gdp is 11 trillion, consumption is 7 trillion, taxes are 2.5 trillion and government runs a budget surplus of 1 trillion. what are private saving and national saving a. 1. 5 trillion and 2.5 trillion b. 2.5 trillion and 1.5 trillion c. 2. 5tirllion and 2.5 trillion d. 1.5 trillion and 1.5 trillion

a. 1.5 trillion and 2.5 trillion

suppose that in a closed economy GDP is 11 trillion, consumption is 7.5 trillion, and taxes are 0.5 trillion. what value of government purchases would make national saving equal to 2 trillion and at that value would the government have defecit or surplus? a. 1.5 trillion; surplus b. 1.5 trillion; deficit c. 1 trillion; deficit d. 1 trillion; surplus

b. 1.5 trillion; deficit

on which of these bonds is the prospect of default least likely? a. junk bond b. bond issued by federal government c. bond issued by state d. bond issued by General Electric

b. bond issued by federal government

The country of Cedarland does not trade with any other country. Its GDP is $17 billion. Its government purchases $5 billion worth of goods and services each year, collects $6 billion in taxes. Private saving in Cedarland is $5 billion. For Cedarland, a. investment is $6 billion and consumption is $7 billion. b. investment is $6 billion and consumption is $6 billion. c. investment is $7 billion and consumption is $7 billion. d. investment is $7 billion and consumption is $6 billion.

b. investment is 6 billion and consumption is 6 billion

other things equal, a tax deduction for firms that purchcase new capital is likely to result in a. shifting demand curve for loanable funds to the left b. shifting demand curve for loanable funds to the right c. shifting supply curve for loanable funds to the right d. shifting supply curve for loanable funds to the left

b. shifting the demand curve for loanable funds to the right

We would expect the interest rate on Bond A to be higher than the interest rate on Bond B if the two bonds have identical characteristics except that a. the default risk associated with bond a is lower than the default risk for bond B b. bond A has a term of 3 years and bond B has a term of 20 years c. bond A was issued by a software company and bond B was issued by the federal government d. all of above

c. bond A was issued by software company and bond B was issued by federal government

which of the following is a possible outcome of a decrease in the government's budget deficit? a. it will lead to an increase in the equilibrium interest rate and an increase in equilibrium quantity in loanable funds market b. it will lead to an increase in the equilibrium interest rate and a fall in equilibrium quantity in the loanable funds market c. it will lead to a fall in the equilibrium interest rate and an increase in the equilibrium quantity in loanable funds market d. it will lead to a fall in the equilibrium interest rate and fall in equilibrium quantity in loanable funds market

c. it will lead to a fall in the equilibrium interest rate and an increase in the equilibrium quantity in the loanable funds market

other things equal, an increase in the tax on interest income is likely to result in a. a lowering equilibrium interest rate b. higher equilibrium quantity c. shifting the supply curve for loanable funds to the left d. all of the above

c. shifting the supply curve for loanable funds to the left

a low price earning ratio indicates that either the stock is a. undervalued or people are relatively optimistic about the corporation's prospects b. overvalued or people are relatively optimistic about the corporation's prospects c. overvalued or people are relatively pessimistic about the corporation's prospects d. undervalued or people are relatively pessimistic about the corporation's prospects

d. undervalued or people are relatively pessimistic about the corporation's prospects

fran buys 1000 shares of stock issued by miller brewing. in turn miller uses the funds to buy new machinery for one of its breweries a. fran and miller are both investing b. fran and miller are both saving c. fran is investing; miller is saving d. fran is saving; miller is investing

fran is saving; miller is investing