macro chapter 13

Henrietta hires a builder to construct a new building for her bicycle shop.

henrietta is investing

When a large, well-known corporation wishes to borrow directly from the public, it can

sell bonds

If the government's expenditures exceeded its receipts, it would likely

sell bonds directly to the public.

In the loanable funds model, an increase in an investment tax credit would create a

shortage at the former equilibrium interest rate. This shortage would lead to a rise in the interest rate.

In the first part of the decade that began in 2000, the U.S. government went from a surplus to a deficit. Other things the same, this means the

supply of loanable funds shifted to the left.

Suppose the U.S. offered a tax credit for firms that built new factories in the U.S.. Then

the demand for loanable funds would shift rightward, initially creating a shortage of loanable funds at the original interest rate.

Who accepts all of the risk associated with a mutual fund's portfolio of stocks and/or bonds?

the fund's shareholders

For a closed economy, GDP is $11 trillion, consumption is $7 trillion, taxes are $2 trillion and the government runs a deficit of $1 trillion. What are private saving and national saving?

$2 trillion and $1 trillion

In a small closed economy investment is $50 billion and private saving is $55 billion. What are public saving and national saving?

-$5 billion and $50 billion

Last quarter in a closed economy GDP was 100,000. Expenditures on capital goods such as business equipment and structures was 10,000, inventory rose 1,000, and new construction of homes was 5,000. Consumption was 65,000, taxes were 15,000. What was public saving?

-4000

Suppose that in a closed economy GDP is equal to 11,000, taxes are equal to 2,500, consumption equals 7,000, and government purchases equal 3,000. What are private saving and public saving?

1,500 and -500

Suppose the market for loanable funds is in equilibrium. Given the numbers below, determine the quantity of loanable funds demanded. GDP=200B C=130B T=30B G=40B

30 billion

In the national income accounting identity showing the equality between national saving and invest-ment, what are the algebraic expressions for private saving and public saving?

Private saving is Y - C - T, Public Saving is T - G

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.

Alex purchases a new truck for his delivery business using borrowed funds.

alex is investing

If the demand for loanable funds shifts to the right, then the equilibrium interest rate

and quantity of loanable funds rise

Which of the following is a certificate of indebtedness?

bonds but not stocks

When opening a print shop you need to buy printers, computers, furniture, and similar items. Economists call these expenditures

capital investment.

The old adage, "Don't put all your eggs in one basket," is very similar to a modern bit of advice concerning financial matters:

diversify

A stock's dividend yield is the

dividend as a percentage of the price per share.

Elaine uses some of her income to buy stock in a major corporation.

elaine is saving

Fred uses some of his income to buy government bonds.

fred is saving

Julie takes some of her income and buys mutual funds.

julie is saving

The primary economic function of the financial system is to

match one person's saving with another person's investment.

A corporation's earnings are the amount of revenue it receives for the sale of its products

minus its cost of production as measured by its accountants. Earnings may be paid out as dividends or retained by the corporation.

Which of the following is a financial intermediary

mutual fund

Cassie purchases 1,000 shares of a mutual fund for $1,000. Cassie's purchase of these shares contributes $1,000 to which magnitude in the identity Y = C + I + G?

none of the above are correct

If a firm's price-earnings ratio is relatively low, then it might be an indication that

people expect the firm's earnings to fall.

A larger budget surplus

reduces the interest rate and raises investment.

If Congress instituted an investment tax credit, the interest rate would

rise and saving would rise.

If the supply for loanable funds shifts to the left, then the equilibrium interest rate

rises and the quantity of loanable funds falls.

At the broadest level, the financial system moves the economy's scarce resources from

savers to borrowers.

A closed economy does not

trade with other economies

The final element of a financial crisis is

vicious circle