Quiz - Ch. 9A: Saving, Investment, and the Financial System

Securitization contributing to the Great Recession occurred in which market?

Home mortgages

Which of the following is NOT a reason individuals typically choose to save?

to increase investment

Which of the following is TRUE about the life-cycle theory of savings?

People tend to borrow during the early years of their lifetimes, save during their prime working years, and dissave during their retirement years.

Why is saving so minimal in nations with a high population of AIDS victims?

People with a short life expectancy tend to save less.

Which of the following can be defined as saving, according to economics?

Sandra purchases a certificate of deposit from a bank.

Insecure property rights in bank account deposits typically lead to:

a decrease in the supply of savings

Crowding out occurs because the government increases the demand for loanable funds, drives up interest rates, and causes:

consumption and private investment to fall

The leverage ratio is the ratio of:

debt to equity

An increase in government borrowing will cause the:

demand for borrowing to shift outward

Which of the following is NOT a reason for financial crisis of 2007-2008?

excessive confidence about the stock market

Bond prices and bond interest rates move:

in opposite directions

The buyer of a bond is a:

lender

Financial intermediaries:

reduce the costs of moving savings from savers to borrowers and investors

The process of bundling loans together and selling them on the market as financial assets is called:

securitization

(Figure: Loanable Funds Market) Refer to the figure of the loanable funds market. At an interest rate of 3% in this market, there is a _____ of loanable funds of ______.

shortage; $320