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- 1. Multiple Choice
If you were to start a business delivering documents, you might need to purchase cell phones, bicycles, desks, and chairs.
These purchases are called capital investment. If you raise the funds from others to
purchase them you are a saver.
These purchases are called capital investment. If you raise the funds from others to
purchase them you are a borrower.
These purchases are called consumption. If you raise the funds from others to
purchase them you are a saver.
These purchases are called consumption. If you raise the funds from others to purchase them you are a borrower
- 2. Multiple Choice
Most entrepreneurs do not have enough money of their own to start their businesses. When they acquire the necessary funds from someone else,
their consumption expenditures are being financed by someone else’s saving.
their consumption expenditures are being financed by someone else’s investment.
their investments are being financed by someone else’s saving.
their saving is being financed by someone else’s investment.
- 3. Multiple Choice
At the broadest level, the financial system moves the economy’s scarce resources from
the rich to the poor.
financial institutions to business firms and government.
households to financial institutions.
savers to borrowers.
- 4. Multiple Choice
Which of the following statements about the term of a bond is correct?
Term refers to the various characteristics of a bond, including its interest rate and tax treatment.
The term of a bond is determined entirely by its credit risk.
The term of a bond is determined entirely by how much sales charge the buyer of the bond pays when he or she purchases the bond.
Interest rates on long-term bonds are usually higher than interest rates on short-term bonds.
- 5. Multiple Choice
The economy’s two most important financial markets are
the investment market and the saving market.
the bond market and the stock market.
banks and the stock market.
financial markets and financial institutions.
- 6. Multiple Choice
We associate the term debt finance with
the bond market, and we associate the term equity finance with the stock market.
the stock market, and we associate the term equity finance with the bond market.
financial intermediaries, and we associate the term equity finance with financial markets.
financial markets, and we associate the term equity finance with financial intermediaries.
- 7. Multiple Choice
A bond is a
financial intermediary.
certificate of indebtedness.
certificate of partial ownership in an enterprise.
None of the above is correct.
- 8. Multiple Choice
Long-term bonds are
riskier than short-term bonds, and so interest rates on long-term bonds are usually lower than interest rates on short-term bonds.
riskier than short-term bonds, and so interest rates on long-term bonds are usually higher than interest rates on short-term bonds.
less risky than short-term bonds, and so interest rates on long-term bonds are usually lower than interest rates on short-term bonds.
less risky than short-term bonds, and so interest rates on long-term bonds are usually higher than interest rates on short-term bonds.
- 9. Multiple Choice
A national chain of grocery stores wants to finance the construction of several new stores. The firm has limited internal funds, so it likely will
demand the required funds by buying bonds.
demand the required funds by selling bonds.
supply the required funds by buying bonds.
supply the required funds by selling bonds.
- 10. Multiple Choice
If Proctor and Gamble sells a bond it is
borrowing directly from the public.
borrowing indirectly from the public.
lending directly to the public.
lending indirectly to the public.
- 11. Multiple Choice
Papa Mario's Pizza Company sells common stock. The company is using
equity financing and the return shareholders earn is fixed.
equity financing and the return shareholders earn depends on how profitable the company is.
debt financing and the return shareholders earn is fixed.
debt financing and the return shareholders earn depends on how profitable the company is.
- 12. Multiple Choice
Stock represents
a claim to a share of the profits of a firm.
ownership in a firm.
equity finance.
All of the above are correct
- 13. Multiple Choice
Suppose that in a closed economy GDP is equal to 11,000, taxes are equal to 2,500 consumption equals 7,500 and government purchases equal 2,000. What are private saving, public saving, and national saving?
1,500, 1,000, and 500, respectively
1,000, 500, and 1,500, respectively
500, 1,500, and 1,000, respectively
None of the above is correct.
- 14. Multiple Choice
Suppose that in a closed economy GDP is 11,000, consumption is 7,500, and taxes are 2,000. What value of government purchases would make national savings equal to 1,000 and at that value would the government have a deficit or surplus?
2,500, deficit
2,500, surplus
1,000, deficit
1,000, surplus
- 15. Multiple Choice
Suppose the economy is closed and consumption is 6,500, taxes are 1,500, and government purchases are 2,000. If national saving amounts to 1,000, then what is GDP?
9,500
10,000
10,500
None of the above is correct.
- 16. Multiple Choice
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?
$4 trillion and $1 trillion, respectively
$4 trillion and $-1 trillion, respectively
$2 trillion and $1 trillion, respectively
$2 trillion and $-1 trillion, respectively
- 17. Multiple Choice
Scenario 26-1. Assume the following information for an imaginary, closed economy.
GDP = $110,000; consumption = $70,000; private saving = $8,000; national
saving = $12,000.
For this economy, investment amounts to
$4,000.
$8,000.
$12,000.
$16,000.
- 18. Multiple Choice
The slope of the supply of loanable funds curve represents the
positive relation between the real interest rate and investment.
positive relation between the real interest rate and saving.
negative relation between the real interest rate and investment.
negative relation between the real interest rate and saving.
- 19. Multiple Choice
If the demand for loanable funds shifts to the left, then the equilibrium interest rate
and quantity of loanable funds rise.
and quantity of loanable funds fall.
rises and the quantity of loanable funds falls.
falls and the quantity of loanable funds rises.
- 20. Multiple Choice
If Congress instituted an investment tax credit, the interest rate would
rise and saving would rise.
fall and saving would fall.
rise and saving would fall.
fall and saving would rise.
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