Macro Exam 2 Quiz 7

Which of the following is not a​ "loanable fund"? A. Real estate. B. Bank certificates of deposit. C. Bonds. D. Mutual fund shares.

A

​A(n) ​ _____ is a financial security that represents partial ownership of a​ firm, while a​ _____ is a financial security that represents a promise to repay a fixed amount of funds. A. ​stock, bond B. ​bond, stock C. interest​ payment, stock D. ​stock, dividend

A

A decrease in the price of a​ firm's bonds would tell managers which of the​ following? A. Investors expect the firm to have higher profits in the future. B. The cost of external funds has increased. C. Investors expect the firm to have lower profits in the future. D. The cost of external funds has decreased.

B

A decrease in the price of a​ firm's stock would tell managers which of the​ following? A. Investors expect the firm to have higher profits in the future. B. Investors expect the firm to have lower profits in the future. C. The cost of external funds has decreased. D. The cost of external funds has increased.

B

At equilibrium in a simple economy, what is the relationship between planned savings and planned​ investment? A. It depends on the​ economy; there is no specific relationship between these variables. B. They are equal. C. Planned savings is greater than planned investment. D. Planned savings is less than planned investment.

B

When the budget deficit​ increases, A. saving decreases while investment increases. B. both saving and investment decrease. C. both saving and investment increase. D. saving increases and investment decreases.

B

Households supply loanable funds because of the A. rent income they receive as resource owner. B. profit income earned from running a​ money-lending business. C. interest income received from the borrowers. D. wage income earned from working in the financial markets.

C

The financial system-either financial markets or financial intermediaries—provides savers and borrowers with all of the following​ except: A. The financial system provides savers with facts and information about borrowers and about expected returns on their financial investments. B. The financial system provides risk-sharing to savers by giving them the opportunity to diversify their funds among different investment choices. C. The financial system provides security to savers by warranting that their funds are fully insured against loss. D. The financial system provides liquidity to savers by giving them the opportunity to buy and sell their financial securities.

C

Businesses demand loanable funds because A. households charge a much higher rate of interest than the going rate of interest in the loanable funds market. B. loanable fund interest rates are always lower than the rate of return on their new investments. C. firms need to borrow funds so that they can pay the wage costs and other recurring expenses of the business. D. firms need to borrow funds for new​ projects, such as building new factories or carrying out new research projects.

D

The financial system of a country is important for​ long-run economic growth because A. people can increase their wealth very quickly under a healthy financial system. B. most firms rely on their own retained earnings and do not use the financial system. C. firms that use the financial system predominantly are being reckless. D. firms need the financial system to acquire funds from households.

D

With the decrease in the equilibrium quantity of loanable​ funds due to a decrease in supply, the quantity of saving _________ and the quantity of investment ______ .

decreases, decreases

When business taxes​ increase, the equilibrium interest rate _______ and the equilibrium quantity of loanable funds ________. What will be the effect of an increase in business taxes on the quantity of investment by firms and the​ economy's capital stock in the​ future? A. The quantity of investment will decrease and the​ economy's future capital stock will decrease. B. The quantity of investment will increase and the​ economy's future capital stock will increase. C. The quantity of investment will decrease and the​ economy's future capital stock will increase. D. The quantity of investment will increase and the​ economy's future capital stock will decrease.

decreases, decreases, A

A federal budget surplus ________ the equilibrium interest rate and _________ the quantity of loanable funds. If the federal government runs a budget​ surplus, A. saving will decrease but investment will increase. B. both saving and investment will decrease. C. saving will increase but investment will decrease. D. both saving and investment will increase.

decreases, increases, D

It is essential for economic growth that _____ have access to adequate sources of​ funds, because otherwise _____ will not be able to invest in capital, adopt new technologies, and expand. (one answer)

firms

Assuming that other factors that affect the demand and supply of loanable funds remain the​ same, as a result of the larger budget​ deficit, the equilibrium real interest rate _________ and the equilibrium quantity of loanable funds ______. .

increases, decreases

A flow of funds from savers to borrowers through financial intermediaries such as banks is ________ finance, while a flow of funds from savers to firms through financial​ markets, such as the New York Stock Exchange is ______ finance.

indirect, direct