Question 1

If interest rates increase, making bonds more attractive, the demand for stock will _____ and the price of stock will _____.

Accepted Answer

A)   increase; increase
B)   increase; decrease
C)   decrease; increase
D)   decrease; decreaseE) A) and B)
F) A) and C)

Question 2

According to the savings-investment spending identity:

Accepted Answer

A)   savings and investment spending are always equal for the economy as a whole.
B)   for long-run economic growth savings must be more than investment spending.
C)   for long-run economic growth savings must be less than investment spending.
D)   the identity of savers and investors is important for encouraging long-run economic growth.E) A) and B)
F) C) and D)

Question 3

The crowding-out effect is the negative effect of government budget deficits on private investment spending.

Accepted Answer

A) True 
 B)False

Question 4

Use the following to answer questions 
Figure: The Market for Loanable Funds III 
-(Figure: The Market for Loanable Funds III)  Look at the figure The Market for Loanable Funds III. If the government in a closed economy finances deficits by selling bonds and it decides to decrease defense spending by $200 billion, the decrease in government spending will encourage _____ in additional private investment spending.

Accepted Answer

A)   $400 billion
B)   $200 billion
C)   $100 billion
D)   $10 billionE) B) and C)
F) None of the above

Question 5

All other things unchanged, a general decrease in the amount of government borrowing will typically:

Accepted Answer

A)   have no effect on the demand for loanable funds.
B)   increase interest rates.
C)   shift the loanable funds demand curve to the left.
D)   raise the level of demand for loanable funds.E) B) and C)
F) All of the above

Question 6

A decrease in the demand for loanable funds would most likely be caused by a(n) :

Accepted Answer

A)   decrease in the inflation rate.
B)   increase in the budget deficit.
C)   decrease in expected business opportunities.
D)   increase in expected business opportunities.E) B) and D)
F) B) and C)

Question 7

If interest rates on bonds rise, holding other things constant, stock prices will:

Accepted Answer

A)   increase.
B)   decrease.
C)   not change.
D)   It is impossible to say how stock prices will change.E) B) and C)
F) A) and D)

Question 8

If a one-year project costs $100,000 and is expected to return the firm $105,000, the rate of return of the project is:

Accepted Answer

A)   4.8%.
B)   5%.
C)   $5,000.
D)   $105,000.E) B) and C)
F) All of the above

Question 9

A loan is:

Accepted Answer

A)   a liability for the lender and an asset for the borrower.
B)   a physical asset that is traded in financial markets.
C)   a claim on a bank that obliges the bank to provide funds to a lender.
D)   a liability for the borrower and an asset for the lender.E) A) and D)
F) None of the above D

Question 10

All other things unchanged, an increase in demand for loanable funds would most likely be caused by a(n) :

Accepted Answer

A)   decrease in expected business opportunities.
B)   increase in the market interest rate.
C)   increase in corporate income tax rates.
D)   increase in government borrowing.E) A) and B)
F) A) and C)

Question 11

The most diversified portfolio in terms of risk is $100,000 worth of stock in:

Accepted Answer

A)   10 companies in the same industry.
B)   10 companies in two industries.
C)   10 companies in five industries.
D)   one company that sells 10 products.E) A) and B)
F) A) and C)

Question 12

According to the savings-investment spending identity, savings and investment spending are always equal for the economy as a whole.

Accepted Answer

A) True 
 B)False

Question 13

An increase in the demand for loanable funds would most likely be caused by a(n) :

Accepted Answer

A)   increase in the market interest rate.
B)   increase in business tax rates.
C)   increase in expected business opportunities.
D)   decrease in expected business opportunities.E) B) and D)
F) A) and B) C

Question 14

If interest rates decrease, making bonds less attractive, the demand for stock will _____ and the price of stock will _____.

Accepted Answer

A)   increase; increase
B)   increase; decrease
C)   decrease; increase
D)   decrease; decreaseE) A) and B)
F) None of the above

Question 15

Which of the following qualifies as an asset from the viewpoint of a household?

Accepted Answer

A)   a house
B)   mortgage
C)   credit card debt
D)   car loanE) A) and C)
F) All of the above

Question 16

Which of the following is a function of financial intermediaries?

Accepted Answer

A)   transforming funds from many individuals to financial assets
B)   transforming funds from many individuals to physical assets
C)   helping individuals and businesses determine their tax liabilities
D)   conducting fiscal policyE) A) and B)
F) A) and C) A

Question 17

If capital inflow is negative, then a country:

Accepted Answer

A)   borrows more than it lends to other countries.
B)   lends more than it borrows from other countries.
C)   has balanced trade.
D)   imports more than it exports.E) A) and D)
F) None of the above

Question 18

If you are paid $10,500 in one year on a $10,000 loan made today, then your annual interest rate is:

Accepted Answer

A)   0.5%.
B)   5%.
C)   10%.
D)   10.5%.E) None of the above
F) All of the above

Question 19

If a country's capital inflow exceeds outflow, then foreigners are contributing to the domestic country's investment spending.

Accepted Answer

A) True 
 B)False

Question 20

Most of Facebook's investment spending is for scholarships for its employees to study the latest social media technology.

Accepted Answer

A) True 
 B)False

Exam 24: Savings, Investment Spending

If interest rates increase, making bonds more attractive, the demand for stock will _ and the price of stock will _.

Correct Answer
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According to the savings-investment spending identity:

Correct Answer
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The crowding-out effect is the negative effect of government budget deficits on private investment spending.

Correct Answer
verified

Correct Answer
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All other things unchanged, a general decrease in the amount of government borrowing will typically:

Correct Answer
verified

A decrease in the demand for loanable funds would most likely be caused by a(n) :

Correct Answer
verified

If interest rates on bonds rise, holding other things constant, stock prices will:

Correct Answer
verified

If a one-year project costs $100,000 and is expected to return the firm $105,000, the rate of return of the project is:

Correct Answer
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A loan is:

Correct Answer
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D

All other things unchanged, an increase in demand for loanable funds would most likely be caused by a(n) :

Correct Answer
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The most diversified portfolio in terms of risk is $100,000 worth of stock in:

Correct Answer
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According to the savings-investment spending identity, savings and investment spending are always equal for the economy as a whole.

Correct Answer
verified

An increase in the demand for loanable funds would most likely be caused by a(n) :

Correct Answer
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C

If interest rates decrease, making bonds less attractive, the demand for stock will _ and the price of stock will _.

Correct Answer
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Which of the following qualifies as an asset from the viewpoint of a household?

Correct Answer
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Which of the following is a function of financial intermediaries?

Correct Answer
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A

If capital inflow is negative, then a country:

Correct Answer
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If you are paid $10,500 in one year on a $10,000 loan made today, then your annual interest rate is:

Correct Answer
verified

If a country's capital inflow exceeds outflow, then foreigners are contributing to the domestic country's investment spending.

Correct Answer
verified

Most of Facebook's investment spending is for scholarships for its employees to study the latest social media technology.

Correct Answer
verified

Exam 24: Savings, Investment Spending

If interest rates increase, making bonds more attractive, the demand for stock will _____ and the price of stock will _____.

Correct AnswerverifiedShow Answer

According to the savings-investment spending identity:

Correct AnswerverifiedShow Answer

The crowding-out effect is the negative effect of government budget deficits on private investment spending.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

All other things unchanged, a general decrease in the amount of government borrowing will typically:

Correct AnswerverifiedShow Answer

A decrease in the demand for loanable funds would most likely be caused by a(n) :

Correct AnswerverifiedShow Answer

If interest rates on bonds rise, holding other things constant, stock prices will:

Correct AnswerverifiedShow Answer

If a one-year project costs $100,000 and is expected to return the firm $105,000, the rate of return of the project is:

Correct AnswerverifiedShow Answer

A loan is:

Correct AnswerverifiedD

All other things unchanged, an increase in demand for loanable funds would most likely be caused by a(n) :

Correct AnswerverifiedShow Answer

The most diversified portfolio in terms of risk is $100,000 worth of stock in:

Correct AnswerverifiedShow Answer

According to the savings-investment spending identity, savings and investment spending are always equal for the economy as a whole.

Correct AnswerverifiedShow Answer

An increase in the demand for loanable funds would most likely be caused by a(n) :

Correct AnswerverifiedC

If interest rates decrease, making bonds less attractive, the demand for stock will _____ and the price of stock will _____.

Correct AnswerverifiedShow Answer

Which of the following qualifies as an asset from the viewpoint of a household?

Correct AnswerverifiedShow Answer

Which of the following is a function of financial intermediaries?

Correct AnswerverifiedA

If capital inflow is negative, then a country:

Correct AnswerverifiedShow Answer

If you are paid $10,500 in one year on a $10,000 loan made today, then your annual interest rate is:

Correct AnswerverifiedShow Answer

If a country's capital inflow exceeds outflow, then foreigners are contributing to the domestic country's investment spending.

Correct AnswerverifiedShow Answer

Most of Facebook's investment spending is for scholarships for its employees to study the latest social media technology.

Correct AnswerverifiedShow Answer

If interest rates increase, making bonds more attractive, the demand for stock will _ and the price of stock will _.

Correct Answer
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D

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C

If interest rates decrease, making bonds less attractive, the demand for stock will _ and the price of stock will _.

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A

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