ch8/11

If Americans become more thrifty, we would expect

the supply of loanable funds to shift to the right and the real interest rate to fall

Which of the following statements is true

municipal bonds pay less interest than comparable corporate bonds

investment is ...

purchase of capital equipment and structures

If Americans become less concerned with the future and save less at each real interest rate,

real interest rates rise and investment falls

If the public consumes $100 billion less and the government purchases $100 billion more (other things unchanging), which of the following statements is true?

savings is unchanged

an increase in the budget deficit that causes the government to increase its borrowing

shifts the supply of loanable funds to the right

An increase in the budget surplus

shifts the supply of loanable funds to the right and reduces the real interest rate

If government spending exceeds tax collections

there is a budget deficit

Money and wealth are the same thing

False

which of the following financial market securities would likely pay the highest interest rate

a bond issued by a start-up company

An increase in the budget deficit

a decrease in public saving

Which of the following sets of government policies is the most growth oriented

lower the return to savings, provide tax investment credits, lower the deficit

National saving (or just saving) is equal to

private saving + public saving

which of the following is an example of equity finance

stock

Credit risk refers to a bond's

probability of default

If GDP = $1,000, consumption = $600, taxes = $100, and government purchases = $200, how much is saving and investment?

S & I = $200 because private + public = savings/investment (1000-600-100)+(100-200) = 200

A financial intermediary is a middleperson between

borrowers and lenders

if an increase in the budget deficit reduces national saving and investment, we have witnessed a demonstration of

crowding out

Fiat money is money that is used in Italy

false

if the government increases investment tax credits and reduces taxes on the return to saving at the same time

impact on real interest rate is indeterminate

commodity money has value independent of its use as money

true