Macro exam 3: 13
Crowding out occurs when investment declines because
a budget deficit makes interest rates rise
The source of the supply of loanable funds is
saving, and the source of the demand for loanable funds is investment.
When a large, well-known corporation wishes to borrow directly from the public, it can
sell bonds
We associate the term debt finance with
the bond market, and we associate the term equity finance with the stock market.
Y = C + I + G + NX is an identity because
the equality holds due to the way the variables are defined
Suppose the economy is closed with national saving of $2 trillion, consumption of $8 trillion, and government purchases of $1 trillion. What is GDP?
$11 trillion
The length of time until a bond matures is called the
. term.
Suppose the economy is closed and consumption is 6,500, taxes are 1,500, and government purchases are 2,000. If national saving amounts to 1,000, then what is GDP?
9,500
If a firm sells a total of 100 shares of stock, then
All of the above are correct.
Which of the following events would shift the demand curve from D1 to D2?
Firms become optimistic about the future and, as a result, they plan to increase their purchases of new equipment and construction of new factories
Which of the following events would shift the supply curve from S1 to S2?
In response to tax reform, households are encouraged to save more than they previously saved.
You observe a closed economy that has a government deficit and positive investment. Which of the following is correct?
Private saving is positive; public saving is negative
If Congress increased the tax rate on interest income, investment
and saving would decrease.
When opening a print shop you need to buy printers, computers, furniture, and similar items. Economists call these expenditures
capital investment.
A budget deficit
changes the supply of loanable funds.
Suppose the government finds a major defect in one of a company's products and demands that the product be taken off the market. We would expect that the
demand for existing shares of the stock and the price will both fall.
The ratio of debt to GDP in the United States
fell during the late 1990s.
Institutions that help to match one person's saving with another person's investment are collectively called the
financial system.
The purchase of a new house is the one form of
household spending that is investment rather than consumption.
When the government runs a budget deficit,
investment is lower than it would be if the budget were balanced.
By definition, equity finance
is accomplished when firms sell shares of stock.
A mutual fund
is an institution that sells shares to the public and uses the proceeds to buy a selection of various types of stocks, bonds, or both stocks and bonds.
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.
The primary economic function of the financial system is to
match one person's saving with another person's investment.
When a country saves a larger portion of its GDP than it did before, it will have
more capital and higher productivity.
In a closed economy, what remains after paying for consumption and government purchases is
national saving.
In a closed economy, what does (T - G) represent?
public saving
A larger budget surplus
reduces the interest rate and raises investment.
If the tax revenue of the federal government exceeds spending, then the government necessarily
runs a budget surplus.
A bond buyer is a
saver. Bond buyers may sell their bonds prior to maturity
What is measured along the horizontal axis of the graph?
the quantity of loanable funds
A closed economy does not
trade with other economies.
