Chapter 26 (A)

1. When opening a restaurant you may need to by ovens, freezers, tables, and cash registers. Economists call these expenditures

• A.capital investment.
• B.investment in human capital.
• C. business consumption expenditures.
• D.None of the above are correct.

2. When a country saves a larger portion of its GDP, it will have

• A.less investment, and so have more capital and higher productivity.
• B.less investment, and so have less capital and higher productivity.
• C. more investment, and so have more capital and higher productivity.
• D.more investment, and so have less capital and higher productivity.

3. Institutions in the economy that help to match one person's saving with another person's investment are collectively called the

• A.Federal Reserve system.
• B.banking system.
• C. monetary system.
• D.financial system.

4. Alfred’s income exceeds his expenditures. Alfred is a

• A.saver who demands money from the financial system.
• B.saver who supplies money to the financial system.
• C. borrower who demands money from the financial system.
• D.borrower who demands money from the financial system.

5. Lucy wants to start her own psychiatric practice, but her expenditures exceed her income. Lucy is a

• A.saver who demands money from the financial system.
• B.saver who supplies money to the financial system.
• C. borrower who demands money from the financial system.
• D.borrower who supplies money to the financial system.

6. A bond is a

• A.financial intermediary.
• B.certificate of indebtedness.
• C. certificate of partial ownership in an enterprise.
• D.None of the above are correct.

7. A certificate of indebtedness that specifies the obligations of the borrower to the holder is called a

• A.bond.
• B.stock.
• C. mutual fund.
• D.All of the above are correct.

8. If the government’s expenditures exceeded its receipts, it would likely

• A.lend money to a bank or other financial intermediary.
• B.borrow money from a bank or other financial intermediary.
• C. directly buy bonds from the public.
• D.directly sell bonds to the public.

9. If Microsoft sells a bond they are

• A.borrowing directly from the public.
• B.borrowing indirectly from the public.
• C. lending directly to the public.
• D.lending indirectly to the public.

10. Which of the following is correct?

• A.The maturity of a bond refers to the amount to be paid back.
• B.The principal of the bond refers to the person selling the bond.
• C. A bond buyer cannot sell a bond before it matures.
• D.None of the above are correct.