CH 26 Saving, Investment and the Financial System

Public saving and the government's budget surplus are the same thing.

true

The quantity of loanable funds is greater if the real interest rates are higher

true

municipal bonds pay less interest than comparable risk corporate bonds because the interest payments are tax exempt to the bond holder

true

An increase in the budget deficit that causes the government to increase its borrowing shifts the demand for loanable funds to the right

false

If the government wanted to increase the rate of growth, it should raise taxes on interest and dividends to shift the supply of loanable funds to the right

false

If the real interest rates in the loanable funds market is temporarily held above the equilibrium rate, desired borrowing will exceed desired lending and the real interest rate will fall

false

If you save money this week and lend it to your roommate to buy food for consumption, your act of personal saving has increased national saving.

false

people who buy stock in a firm have loaned money to the firm

false

public saving is always positive

false

when a business firm sells a bond, it has engaged in equity finance

false

A reduction in the budget deficit should shift the supply of loanable funds to the right, lower the real interest rate, and increase the quantity demanded of loanable funds.

true

In a closed economy, investment is always equal to saving regardless of where the saving came from -public or private sources

true

In a closed economy, saving is what remains after consumption expenditures and government purchases

true

Investment is the purchase of capital equipment and structures

true

Mutual funds reduce a shareholder's risk by purchasing a diversified portfolio.

true