A) John buys shares of stock issued by a fast food company.
B) A foreign government buys bonds issued by the U.S. Treasury.
C) Susan makes a deposit at a bank and the bank uses this money to make an auto loan to Ferguson.
D) None of the above is correct.
F) A) and D)
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A) pays continuously compounded interest.
B) pays interest only when it matures.
C) never matures.
D) will be used to purchase another bond when it matures unless the owner specifies otherwise.
F) None of the above
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A) the amount of income that households have left after paying for their taxes and consumption.
B) the amount of income that businesses have left after paying for the factors of production.
C) the amount of tax revenue that the government has left after paying for its spending.
D) always equal to investment.
F) All of the above
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A) in our model of the loanable funds market, we define "loanable funds" as the flow of resources available to fund private investment.
B) in our model of the loanable funds market, we define "loanable funds" as the flow of resources available from private saving.
C) markets for government debt are fundamentally different from markets for private debt.
D) of our assumption that the economy is closed.
F) None of the above
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A) equity financing and the return shareholders earn is fixed.
B) equity financing and the return shareholders earn depends on how profitable the company is.
C) debt financing and the return shareholders earn is fixed.
D) debt financing and the return shareholders earn depends on how profitable the company is.
F) None of the above
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A) Fran and Miller are both investing.
B) Fran and Miller are both saving.
C) Fran is investing; Miller is saving.
D) Fran is saving; Miller is investing.
F) All of the above
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A) saver. Long term bonds have less risk than short term bonds.
B) saver. Long term bonds have more risk than short term bonds.
C) borrower. Long term bonds have less risk than short term bonds..
D) borrower. Long term bonds have more risk than short term bonds.
F) C) and D)
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A) tax reforms encouraged greater saving or the budget deficit became smaller.
B) tax reforms encouraged greater saving or investment tax credits were increased.
C) the budget deficit became larger or investment tax credits were increased.
D) the budget deficit became larger or tax reforms discouraged saving.
F) None of the above
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A) By saving a larger portion of its GDP, a country can raise its output per worker.
B) Savers supply their money to the financial system with the expectation that they will get it back with interest at a later date.
C) Financial intermediaries are the only type of financial institution.
D) The financial system helps match people's saving with other people's borrowing.
F) A) and B)
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B) False
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A) $15 billion surplus, and in the second case a $10 billion surplus.
B) $15 billion surplus, and in the second case a $10 billion deficit.
C) $5 billion surplus, and in the second case a $10 billion surplus.
D) $5 billion surplus, and in the second case a $10 billion deficit.
F) A) and C)
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A) the same as financial markets.
B) individuals who make profits by buying a stock low and selling it high.
C) a more general name for financial assets such as stocks, bonds, and checking accounts.
D) financial institutions through which savers can indirectly provide funds to borrowers.
F) All of the above
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A) the inflation rate.
B) gross domestic product.
C) the real interest rate.
D) the nominal interest rate.
F) A) and B)
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A) $6 trillion, $6 trillion
B) $6 trillion, $2 trillion
C) $1 trillion, $4 trillion
D) $2 trillion, $2 trillion
F) A) and B)
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A) the interest rate and quantity of loanable funds would increase
B) the interest rate and quantity of loanable funds would decrease.
C) the interest rate would increase and the quantity of loanable funds would decrease.
D) the interest rate would decrease and the quantity of loanable funds would increase.
F) A) and B)
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A) applies to the world economy.
B) applies to most national economies.
C) requires us to assume that the government's budget is always balanced.
D) All of the above are correct.
F) A) and C)
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A) stock markets
B) financial institutions
C) financial markets
D) financial intermediaries
F) A) and C)
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A) high, perhaps indicating that people expect future earnings to rise.
B) high, perhaps indicating that people expect future earnings to fall.
C) low, perhaps indicating that people expect future earnings to rise.
D) low, perhaps indicating that people expect future earnings to fall.
F) A) and D)
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A) inflation.
B) a decline in confidence in financial institutions.
C) a relaxation of rules and regulations that pertain to the financial system.
D) a large decline in some asset prices.
F) B) and D)
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B) False
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