Question 1

The amount of revenue a firm receives for the sale of its products minus its costs of production as measured by its accountants is the firm's

Accepted Answer

A)   earnings.
B)   retained earnings.
C)   economic,or real,profit.
D)   dividend.E) C) and D)
F) A) and D)

Question 2

People who buy stock in a corporation such as General Electric become

Accepted Answer

A)   creditors of General Electric,so the benefits of holding the stock depend on General Electric's profits.
B)   creditors of General Electric,but the benefits of holding the stock do not depend on General Electric's profits.
C)   part owners of General Electric,so the benefits of holding the stock depend on General Electric's profits.
D)   part owners of General Electric,but the benefits of holding the stock do not depend on General Electric's profits.E) None of the above
F) B) and C)

Question 3

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?

Accepted Answer

A)   2,500,deficit
B)   2,500,surplus
C)   1,000,deficit
D)   1,000,surplusE) C) and D)
F) B) and D)

Question 4

Which of the following is included in the demand for loanable funds?

Accepted Answer

A)   investment and government borrowing
B)   investment but not government borrowing
C)   government borrowing but not investment
D)   neither government borrowing nor investmentE) B) and D)
F) All of the above

Question 5

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

Accepted Answer

A)   and quantity of loanable funds rise.
B)   and quantity of loanable funds fall.
C)   rises and the quantity of loanable funds falls.
D)   falls and the quantity of loanable funds rises.E) None of the above
F) All of the above

Question 6

Table 13-2
 
-Refer to Table 13-2.Which company had the lowest earnings per share?

Accepted Answer

A)   Boeing Co.
B)   Eli Lilly and Co.
C)   H.J.Heinz and Co.
D)   Kellog Co.E) B) and C)
F) None of the above

Question 7

Which of the following could explain a decrease in the equilibrium interest rate and an increase in the equilibrium quantity of loanable funds?

Accepted Answer

A)   The demand for loanable funds shifted rightward.
B)   The demand for loanable funds shifted leftward.
C)   The supply of loanable funds shifted rightward.
D)   The supply of loanable funds shifted leftward.E) A) and B)
F) B) and D)

Question 8

The indirect provision of funds by savers to borrowers is accomplished by

Accepted Answer

A)   banks and other financial markets.
B)   banks and other financial intermediaries.
C)   stock markets and other financial markets.
D)   All of the above are correct.E) A) and D)
F) All of the above

Question 9

Which of the following statements about mutual funds is correct?

Accepted Answer

A)   A mutual fund is a financial intermediary.
B)   A mutual fund acquires its funds primarily by selling shares to the public.
C)   People who buy shares from a mutual fund accept all of the risk and return associated with the mutual fund's portfolio.
D)   All of the above are correct.E) A) and B)
F) A) and D)

Question 10

How do banks make profits?

Accepted Answer

They charge borrower...

Question 11

Congress and the President implement an investment tax credit.Which curve in the market for loanable funds shifts,which direction does it shift,and what happens to the interest rate?

Accepted Answer

The demand for loana...

Question 12

Other things the same,which bond would you expect to pay the highest interest rate?

Accepted Answer

A)   a bond issued by the U.S.government
B)   a bond issued by Microsoft Corporation
C)   a bond issued by the state of Montana
D)   a bond issued by a new chain of Brazilian-style restaurantsE) A) and D)
F) A) and B)

Question 13

The term loanable funds refers to all income that is not used for consumption.

Accepted Answer

A) True 
 B)False

Question 14

What does the maturity of a bond indicate?

Accepted Answer

The date a...

Question 15

Melinda buys new equipment for her dental office with funds she borrowed from a bank that raised funds from depositors.Which of the following is correct?

Accepted Answer

A)   Melinda is an investor.
B)   The depositors are investors.
C)   Both Melinda and the depositors are investors.
D)   Neither Melinda nor the depositors are investors.E) C) and D)
F) B) and C)

Question 16

If the nominal interest rate is 2.5 percent and the inflation rate is 2 percent,what is the real interest rate?

Accepted Answer

A)   .5 percent
B)   1.25 percent
C)   4.5 percent
D)   None of the above is correct.E) B) and C)
F) None of the above

Question 17

As an alternative to selling shares of stock as a means of raising funds,a large company could,instead,

Accepted Answer

A)   invest in physical capital.
B)   use equity finance.
C)   sell bonds.
D)   purchase bonds.E) B) and C)
F) A) and B)

Question 18

We would expect the interest rate on Bond A to be higher than the interest rate on Bond B if the two bonds have identical characteristics except that

Accepted Answer

A)   the credit risk associated with Bond A is lower than the credit risk associated with Bond B.
B)   Bond A was issued by the city of Philadelphia and Bond B was issued by Red Hat Corporation.
C)   Bond A has a term of 20 years and Bond B has a term of 2 years.
D)   All of the above are correct.E) B) and C)
F) A) and D)

Question 19

Which of the following statements is correct?

Accepted Answer

A)   A large,well-known corporation such as Intel generally would use financial intermediation to finance expansion of its facilities.
B)   On average,managed funds outperform indexed funds.
C)   Unlike corporate bonds and stocks,checking accounts are a medium of exchange.
D)   A mutual fund is a financial market.E) A) and B)
F) B) and D)

Question 20

All else equal,when people become more optimistic about a company's future,the

Accepted Answer

A)   supply of the stock and the price will both rise.
B)   supply of the stock and the price will both fall.
C)   demand for the stock and the price will both rise.
D)   demand for the stock and the price will both fall.E) B) and C)
F) A) and B)

Exam 26: Saving,investment,and the Financial System

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

People who buy stock in a corporation such as General Electric become

Correct AnswerverifiedShow Answer

We would expect the interest rate on Bond A to be higher than the interest rate on Bond B if the two bonds have identical characteristics except that

Correct AnswerverifiedShow Answer

Other things the same,which bond would you expect to pay the highest interest rate?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The indirect provision of funds by savers to borrowers is accomplished by

Correct AnswerverifiedShow Answer

Which of the following could explain a decrease in the equilibrium interest rate and an increase in the equilibrium quantity of loanable funds?

Correct AnswerverifiedShow Answer

Which of the following statements about mutual funds is correct?

Correct AnswerverifiedShow Answer

The amount of revenue a firm receives for the sale of its products minus its costs of production as measured by its accountants is the firm's

Correct AnswerverifiedShow Answer

How do banks make profits?

Correct AnswerverifiedThey charge borrower...View AnswerShow Answer

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?

Correct AnswerverifiedShow Answer

What does the maturity of a bond indicate?

Correct AnswerverifiedThe date a...View AnswerShow Answer

Which of the following is included in the demand for loanable funds?

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Melinda buys new equipment for her dental office with funds she borrowed from a bank that raised funds from depositors.Which of the following is correct?

Correct AnswerverifiedShow Answer

Congress and the President implement an investment tax credit.Which curve in the market for loanable funds shifts,which direction does it shift,and what happens to the interest rate?

Correct AnswerverifiedThe demand for loana...View AnswerShow Answer

The term loanable funds refers to all income that is not used for consumption.

Correct AnswerverifiedShow Answer

As an alternative to selling shares of stock as a means of raising funds,a large company could,instead,

Correct AnswerverifiedShow Answer

All else equal,when people become more optimistic about a company's future,the

Correct AnswerverifiedShow Answer

Table 13-2 -Refer to Table 13-2.Which company had the lowest earnings per share?

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If the nominal interest rate is 2.5 percent and the inflation rate is 2 percent,what is the real interest rate?

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They charge borrower...
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The date a...
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The demand for loana...
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