Macroeconomics lesson 8

Refer to Table 26-1. The quantity of private saving is:

• $1 trillion.

• $1.4 trillion.

• $2.1 trillion.

• $6.2 trillion.

The price of a stock will rise if the

• demand for the stock falls.

• supply of the stock rises.

• demand for the stock rises.

• managers of a stock exchange decide the price should be higher.

Which of the following movements would be consistent with the government budget going from deficit to surplus and the simultaneous enactment of an investment tax credit?

• A movement from Point A to Point C

• A movement from Point F to Point B

• A movement from Point B to Point F

• A movement from Point B to Point A

It is claimed that a secondary advantage of mutual funds is that:

• they usually outperform stock market indexes.

• an investor can avoid investment charges and fees.

• they give ordinary people access to loanable funds for investing.

• they give ordinary people access to the skills of professional money managers.

The country of Cedarland does not trade with any other country. Its GDP is $17 billion. Its government purchases $5 billion worth of goods and services each year and collects $6 billion in taxes. Private saving in Cedarland is $5 billion. For Cedarland, investment is 

•  

  $7 billion and consumption is $6 billion.

   

• $7 billion and consumption is $7 billion.

• $6 billion and consumption is $6 billion.

   

• $6 billion and consumption is $7 billion.

By definition, equity finance is accomplished when firms sell bonds.

• is accomplished when firms sell bonds.

• is accomplished when units of government sell bonds.

• involves 'fair' interest rates or dividend yields.

• is accomplished when firms sell shares of stock.

Suppose the city of Des Moines has a high credit rating, and so when Des Moines borrows funds by selling bonds, the city's high credit rating

• and the tax status of municipal bonds both contribute to a lower interest rate than would otherwise apply.

• contributes to a higher interest rate than would otherwise apply, while the tax status of municipal bonds contributes to a lower interest rate than would otherwise apply.

• and the tax status of municipal bonds both contribute to a higher interest rate than would otherwise apply.

• contributes to a lower interest rate than would otherwise apply, while the tax status of municipal bonds contributes to a higher interest rate than would otherwise apply.

Other things the same, when the interest rate rises, people would want to lend:

• less, making the supply of loanable funds increase.

• more, making the supply of loanable funds decrease.

• less, making the quantity of loanable funds supplied decrease.

• more, making the quantity of loanable funds supplied increase.

If there is a shortage of loanable funds, then

• neither curve shifts, but the quantity of loanable funds supplied decreases and the quantity demanded increases as the interest rate falls to equilibrium.

• the supply for loanable funds shifts left and the demand shifts right.

• the supply for loanable funds shifts right and the demand shifts left.

• neither curve shifts, but the quantity of loanable funds supplied increases and the quantity demanded decreases as the interest rate rises to equilibrium.

Suppose that in a closed economy GDP is equal to $33,000, consumption equal to $18,000, government purchases equal $6,500, and taxes equal $6,750. What are private saving, public saving, and national saving?

• $15,000, $26,250, and $13,250, respectively

   

• $250, $8,250, and $8,500, respectively

   

• $26,250, $15,000, and $13,250, respectively

   

• $8,250, $250, and $8,500, respectively