Chapter 26

Chapter 26 Saving, Investment, and the Financial System
TRUE/FALSE 1. The financial system coordinates investment and saving, which are important determinants of long-run real GDP. AN ! T D"#! 1 $%#! &'-1 NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! "nvestment + aving , *! Definitional &. -hen economists refer to investment, they mean the purchasing of stoc.s and /onds and other types of saving. AN ! # D"#! 1 $%#! &'-1 NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! "nvestment + aving , *! Definitional 0. 1an.s and mutual funds are e2amples of financial mar.ets. AN ! # D"#! 1 $%#! &'-1 NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! #inancial intermediaries + #inancial mar.ets , *! Definitional 3. -hen a firm wants to /orrow directly from the pu/lic to finance the purchase of new e4uipment, it does so /y selling shares of stoc.. AN ! # D"#! 1 $%#! &'-1 NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! 1onds + toc. , *! Definitional 5. ,ost entrepreneurs finance their purchases of real capital using their past saving. AN ! # D"#! 1 $%#! &'-1 NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! "nvestment , *! Definitional '. )ther things the same, the higher the rate of saving and investment in a country, the higher will /e the standard of living. AN ! T D"#! 1 $%#! &'-1 NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! aving + "nvestment , *! "nterpretive 6. (enders sell /onds and /orrowers /uy them. AN ! # D"#! 1 $%#! &'-1 NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! 1onds , *! Definitional 7. -hen a firm wants to /orrow directly from the pu/lic to finance the purchase of new e4uipment, it does so /y selling /onds. AN ! T D"#! 1 $%#! &'-1 NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! 1onds + toc. , *! Definitional 8. )ther things the same, corporate /onds generally feature higher interest rates than 9. . government /onds. AN ! T D"#! 1 $%#! &'-1 NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! 1onds , *! Definitional 1:. The sale of either stoc.s or /onds to raise money is .nown as e4uity finance. AN ! # D"#! 1 $%#! &'-1 NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! 1onds + toc. , *! Definitional
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*hapter &'; aving, "nvestment, and the #inancial ystem
11. -hen a corporation e2periences financial pro/lems, /ondholders are paid /efore stoc.holders. AN ! T D"#! 1 $%#! &'-1 NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! 1onds + toc. , *! Definitional 1&. *orporations receive no proceeds from the resale of their stoc.. AN ! T D"#! 1 $%#! &'-1 NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! toc. , *! Definitional 10. Generally, if people /egin to e2pect a company to have higher future profits, the price of the company<s stoc. will /egin to decrease. AN ! # D"#! & $%#! &'-1 NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! toc. , *! "nterpretive 13. "f a share of stoc. in .ylight *hili sells for =65, the retained earnings per share are =5, and the divided per share is =&, then the price-earnings ratio is 15. AN ! # D"#! & $%#! &'-1 NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! toc. , *! Applicative 15. "f people /ecome less optimistic a/out the future earnings of >yde Par. ?a@@ tudio, then the price of the company<s stoc. will fall. AN ! T D"#! 1 $%#! &'-1 NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! toc.. , *! "nterpretive 1'. ,utual funds are a type of financial intermediary. AN ! T D"#! 1 $%#! &'-1 NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! ,utual funds + #inancial intermediaries , *! Definitional 16. "nde2 funds are usually outperformed /y mutual funds that are actively managed /y professional money managers. AN ! # D"#! 1 $%#! &'-1 NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! ,utual funds , *! Definitional 17. To state that national saving is e4ual to investment, for a closed economy, is to state an accounting identity. AN ! T D"#! 1 $%#! &'-& NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! "dentities , *! "nterpretive 18. National saving is e4ual to Y - T - C. AN ! # D"#! & $%#! &'-& NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! National saving , *! "nterpretive &:. Pu/lic saving is T - G, while private saving is Y - T - C. AN ! T D"#! 1 $%#! &'-& NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! Private saving + Pu/lic saving , *! "nterpretive &1. Pu/lic saving is e4ual to national saving minus private saving. AN ! T D"#! & $%#! &'-& NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! National saving , *! Definitional

&&. To state that pu/lic saving is e4ual to investment, for a closed economy, is to state an accounting identity. AN ! # D"#! 1 $%#! &'-& NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! "dentities , *! "nterpretive &0. "n a closed economy, investment must /e e4ual to private saving. AN ! # D"#! & $%#! &'-& NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! Private saving + "nvestment , *! Definitional &3.
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"f, for an imaginary closed economy, investment amounts to =1:,::: and the government is running a =&,5:: deficit, then private saving must amount to =1&,5::. AN ! T D"#! & $%#! &'-& NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! "dentities + Private saving + "nvestment , *! Applicative &5. "f, for an imaginary closed economy, investment amounts to =1&,::: and the government is running a =&,::: deficit, then private saving must amount to =1:,:::. AN ! # D"#! & $%#! &'-& NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! "dentities + Private saving + "nvestment , *! Applicative &'. uppose a small closed economy has GDP of =5 /illion, consumption of =0 /illion, and government e2penditures of =1 /illion. Then investment and national saving are /oth =1 /illion. AN ! T D"#! & $%#! &'-& NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! National saving + "nvestment , *! Applicative &6. ?oan uses some of her income to /uy mutual fund shares. A macroeconomist refers to ?oanAs purchase as investment. AN ! # D"#! 1 $%#! &'-& NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! aving + "nvestment , *! "nterpretive &7. Al/erta /uys a paint sprayer and a lift for her car customi@ing shop. A macroeconomist would refer to these purchases as investment. AN ! T D"#! 1 $%#! &'-& NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! "nvestment , *! "nterpretive &8. The demand for loana/le funds comes from saving and the supply of loana/le funds comes from investment. AN ! # D"#! 1 $%#! &'-0 NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! ,ar.et for loana/le funds , *! Definitional 0:. A decrease in ta2es on interest income would increase the interest rate. AN ! # D"#! & $%#! &'-0 NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! aving + ,ar.et for loana/le funds , *! Applicative 01. "f *ongress instituted an investment ta2 credit, the demand for loana/le funds would shift rightward. AN ! T D"#! & $%#! &'-0 NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! "nvestment , *! Applicative 0&. -hen the government /udget deficit rises, national saving is reduced, interest rates rise, and investment falls. AN ! T D"#! & $%#! &'-0 NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! 1udget deficits , *! Applicative
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00. The term crowding out refers to decreases in the interest rate caused /y government /udget surpluses. AN ! # D"#! & $%#! &'-0 NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! *rowding out , *! Definitional 03. -hen the 9. . government is in de/t during a given year, it follows that its /udget is in deficit for that year. AN ! # D"#! 1 $%#! &'-0 NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! Government de/t + 1udget deficits , *! "nterpretive 05. The ratio of government de/t to GDP was higher during the $eagan presidency than at any previous time in 9. . history. AN ! # D"#! 1 $%#! &'-0 NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! Government de/t , *! Definitional 0'. An increase in the demand for loana/le funds increases the e4uili/rium interest rate and increases the e4uili/rium level of saving. AN ! T D"#! & $%#! &'-0 NAT! Analytic ()*! 9nderstanding and applying economic models T)P! ,ar.et for loana/le funds , *! Applicative 06. An increase in the demand for loana/le funds increases the e4uili/rium interest rate and decreases the e4uili/rium level of saving. AN ! # D"#! & $%#! &'-0 NAT! Analytic ()*! 9nderstanding and applying economic models T)P! ,ar.et for loana/le funds , *! Applicative 07. The term loanable funds refers to all income that is not used for consumption. AN ! # D"#! & $%#! &'-0 NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! ,ar.et for loana/le funds , *! Definitional 08. The term loanable funds refers to all income that is not used for consumption or government e2penditures. AN ! T D"#! & $%#! &'-0 NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! ,ar.et for loana/le funds , *! Definitional 3:. -e interpret the term loanable funds to mean the flow of resources availa/le to fund private investment. AN ! T D"#! & $%#! &'-0 NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! ,ar.et for loana/le funds , *! "nterpretive 31. An increase in the /udget deficit shifts the demand for loana/le funds to the right. AN ! # D"#! & $%#! &'-0 NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! 1udget deficits , *! Applicative 3&. A government may use deficit financing to smooth ta2 rates over time. AN ! T D"#! & $%#! &'-0 NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! 1udget deficits , *! Analytic

S !RT A"S#ER
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1. -hat are the /asic differences /etween /onds and stoc.sB AN ! A /ond is a certificate of inde/tedness that specifies the o/ligations of the /orrower to the holder of the /ond, while stoc. represents a share of ownership in a firm and is, therefore, a claim on the profits that the firm ma.es. The sale of /onds to raise money is called de/t finance, while the sale of stoc. is called e4uity finance. -hereas the owner of shares of stoc. in a company share in the profits of a company, the owner of /onds receives a fi2ed interest rate. *ompared to /onds, stoc.s offer the holder /oth higher ris. and a potentially higher return. D"#! & $%#! &'-1 NAT! Analytic ()*! The tudy of economics, and definitions of economics , *! "nterpretive &. T)P! toc. + 1onds
-hich of the two /onds in each e2ample would you e2pect to generally pay the higher interest rateB %2plain why. a. a 9. . government /ond or a 1ra@ilian government /ond /. a 9. . government /ond or a municipal /ond with the same term and issued /y a creditworthy municipality. c. a '-month Treasury /ill or a &:-year Treasury /ond d. a ,icrosoft /ond or a /ond issued /y a new recording company a. /. c. d. The 1ra@ilian government /ond would li.ely pay a higher interest rate /ecause the mar.et perceives a higher level of ris. for the 1ra@ilian /ond relative to the 9. . /ond. 1ecause of the ta2 advantages of municipal /onds, the 9. . government /ond would li.ely pay the higher interest rate. The &:-year /ond would li.ely pay a higher interest rate than would the '-month /ill. The future is uncertain and therefore more ris.y for a &:-year /ond than for a '-month /ill. ince ,icrosoft is less li.ely to default than a new and un.nown company, the interest on the /ond of the new company is li.ely to /e higher. T)P! 1onds
AN !
D"#! & $%#! &'-1 NAT! Analytic ()*! The tudy of economics, and definitions of economics , *! Applicative 0.
uppose that you are a /ro.er and people tell you the following a/out themselves. -hat sort of /ond would you recommend to eachB Defend your choices. a. C" am in a high federal income ta2 /rac.et and " donAt want to ta.e very much ris..C /. C" want a high return and " am willing to ta.e a lot of ris. to get it.C c. C" want a decent return and " have enough deductions that " donAt value ta2 /rea.s highly.C a. /. c. A municipal /ond. ,unicipal /onds generally have low credit ris. and are not su/Dect to federal income ta2. A Dun. /ond. ?un.s /onds have a high return /ecause they have high ris.. A corporate /ond that isnAt a Dun. /ond. *orporate /onds have more ris. than government /onds /ut have no special ta2 treatment, so they pay moderate rates of return. T)P! 1onds
AN !
D"#! & $%#! &'-1 NAT! Analytic ()*! The tudy of economics, and definitions of economics , *! Analytical 3.
Eour /rother-in-law wants to /uy either stoc. or /onds in *edar Falley #urniture, which manufactures wooden furniture. >e wants your advice on whether to /uy stoc. or /onds. %2plain how each of his 4uotes /elow should affect his choice /etween the stoc. and the /ond. a. C" have reason to /elieve that people are soon going to find roc.ing chairs have health /enefits.C /. C" would li.e to tell people " am part owner of *edar Falley #urniture.C c. C" do not want to ta.e on much ris..C
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AN ! a. /. c.

Presuma/ly, when this happens, unless everyone else has anticipated it, dividends, the price of the stoc., or /oth will increase. The interest rate on /onds will not change as profits increase, so this 4uote suggests /uying stoc. would /etter suit your /rother-in lawAs purposes. 1ondholders are simply creditors, while stoc.holders are part owners. o this 4uote indicates your /rother-in-law would prefer to /uy stoc.. "n case of financial difficulties stoc.holders get paid after /ondholders, so the stoc. is somewhat more ris.y. o, your /rother-in-law may prefer the /ond. T)P! toc. + 1onds
D"#! & $%#! &'-1 NAT! Analytic ()*! The tudy of economics, and definitions of economics , *! "nterpretive 5.
uppose the ,ove "tG e2ercise chain has revenues of =35 million, accounting costs of =15 million, and currently has issued 1: million shares of stoc.s selling at =8: each. *ompute the price-earning ratio. how your wor.. "s this ratio relatively high or lowB -hat might an increase in the price-earnings ratio indicateB
AN ! The earnings per share is H=35 million - =15 millionI;1: million J =0. o, the price-earnings ratio is =8:;=0 J 0:. This is a high P;% ratio, as the historical average for the mar.et is a/out 15. An increase in the P% ratio may indicate the people e2pect the firm to have higher earnings in the future or that the stoc. has /ecome overvalued. D"#! & $%#! &'-1 NAT! Analytic ()*! The tudy of economics, and definitions of economics , *! Analytical '. T)P! toc.
"n the national income accounting identity showing the e4uality /etween national saving and investment, what are the alge/raic e2pressions for private saving and pu/lic savingB
AN ! Private saving is E - * - T, Pu/lic aving is T - G D"#! & $%#! &'-& NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! Private saving + Pu/lic saving , *! "nterpretive 6. "dentify each of the following acts as representing either saving or investment. a. #red uses some of his income to /uy government /onds. /. ?ulie ta.es some of her income and /uys mutual funds. c. Ale2 purchases a new truc. for his delivery /usiness using /orrowed funds. d. %laine uses some of her income to /uy stoc. in a maDor corporation. e. >enrietta hires a /uilder to construct a new /uilding for her /icycle shop. a. /. c. d. e. #red is saving. ?ulie is saving. Ale2 is investing. %laine is saving. >enrietta is investing. T)P! aving + "nvestment
AN !
D"#! 1 $%#! &'-& NAT! Analytic ()*! The tudy of economics, and definitions of economics , *! "nterpretive

7. Draw and la/el a graph showing e4uili/rium in the mar.et for loana/le funds. AN ! ,ar.et for (oana/le #unds
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D"#! 1 $%#! &'-0 NAT! Analytic ()*! 9nderstanding and Applying %conomic ,odels T)P! , *! "nterpretive 8.
,ar.et for loana/le funds
%2plain why the demand for loana/le funds slopes downward and why the supply of loana/le funds slopes upward.
AN ! -hen the interest rate rises investment spending /ecomes more e2pensive, so people invest less. As the interest rate rises saving /ecomes more rewarding, so people want to save more. The inverse relation /etween interest and /orrowing is reflected in the downward slope of the demand for loana/le funds curve. The positive relation /etween interest and saving is reflected in the upward slope of the supply of loana/le funds curve. D"#! & $%#! &'-0 NAT! Analytic ()*! 9nderstanding and Applying %conomic ,odels T)P! , *! "nterpretive 1:. ,ar.et for loana/le funds
The model of the mar.et for loana/le funds shows that an investment ta2 credit will cause interest rates to rise and investment to rise. Eet we also suppose that higher interest rates lead to lower investment. >ow can these two conclusions /e reconciledB
AN ! The claim that an increase in the interest rate decreases investment supposes that only the interest rate changes and everything else is constant. The investment ta2 credit causes investment to rise at each interest rate. As firms want to /orrow more the interest rate will rise. The rise in interest rates does ma.e investment less than it would otherwise /e, /ut unless the supply of loana/le funds is vertical, the increase in investment demand from the ta2 credit is larger than the decrease in investment demand from the rising interest rate. D"#! 0 $%#! &'-0 NAT! Analytic ()*! 9nderstanding and Applying %conomic ,odels T)P! , *! Analytical "nvestment
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11.

9sing a graph representing the mar.et for loana/le funds, show and e2plain what happens to interest rates and investment if the government /udget goes from a deficit to a surplus.
AN ! As shown in the graph /elow, the economy starts in e4uili/rium at point E: with interest rate r: and e4uili/rium 4uantity of saving and investment at q:. "f the government succeeds in o/taining a surplus, there will /e more pu/lic saving in the economy and so more national saving at each interest rate, and the supply of loana/le funds curve will shift from S: to 1. The new e4uili/rium will /e at E1, with a lower interest rate, r1 and a higher 4uantity of saving and investment, q1. >ence, if the federal government succeeds in having a surplus, interest rates will fall and investment will increase. ,ar.et for (oana/le #unds
D"#! & $%#! &'-0 NAT! Analytic ()*! 9nderstanding and Applying %conomic ,odels T)P! 1udget deficits + 1udget surpluses , *! Applicative
Sec$$ % Saving, Investment, and the Financial System

&ULTI'LE C !ICE 1. -hen opening a print shop you need to /uy printers, computers, furniture, and similar items. %conomists call these e2penditures a. capital investment. /. investment in human capital. c. /usiness consumption e2penditures. d. personal saving. D"#! 1 $%#! &'-: ()*! The tudy of economics, and definitions of economics , *! Definitional
AN ! A NAT! Analytic T)P! "nvestment &.
"f you were to start a /usiness delivering documents, you might need to purchase cell phones, /icycles, des.s, and chairs. a. These purchases are called capital investment. "f you raise the funds from others to purchase them you are a saver. /. These purchases are called capital investment. "f you raise the funds from others to purchase them you are a /orrower. c. These purchases are called consumption. "f you raise the funds from others to purchase them you are a saver. d. These purchases are called consumption. "f you raise the funds from others to purchase them you are a /orrower. D"#! & $%#! &'-: ()*! The study of economics, and definitions of economics , *! "nterpretive
AN ! 1 NAT! Analytic T)P! "nvestment

0. -hen a country saves a larger portion of its GDP than it did /efore, it will have a. more capital and higher productivity. /. more capital and lower productivity. c. less capital and higher productivity. d. less capital and lower productivity.
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AN ! A D"#! 1 $%#! &'-: NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! aving + "nvestment , *! "nterpretive 3. "nstitutions that help to match one personAs saving with another personAs investment are collectively called the a. #ederal $eserve system. /. /an.ing system. c. monetary system. d. financial system.
AN ! D D"#! 1 $%#! &'-: NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! #inancial system , *! Definitional 5. The primary economic function of the financial system is to a. .eep interest rates low. /. provide e2pert advice to savers and investors. c. match one person<s consumption e2penditures with another person<s capital e2penditures. d. match one person<s saving with another person<s investment.
AN ! D D"#! & $%#! &'-: NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! #inancial system , *! "nterpretive '. Given that (e.eishaAs income e2ceeds her e2penditures, (e.eisha is /est descri/ed as a a. saver or as a supplier of funds. /. saver or as a demander of funds. c. /orrower or as a supplier of funds. d. /orrower or as a demander of funds. D"#! 1 $%#! &'-: ()*! The tudy of economics, and definitions of economics , *! "nterpretive
AN ! A NAT! Analytic T)P! aving 6.
Alyssa is opening a /icycle shop, and her monthly e2penditures to get the shop up and running e2ceed her monthly income. Alyssa is /est descri/ed as a a. saver or as a supplier of funds. /. saver or as a demander of funds. c. /orrower or as a supplier of funds. d. /orrower or as a demander of funds. D"#! 1 $%#! &'-: ()*! The tudy of economics, and definitions of economics , *! "nterpretive
AN ! D NAT! Analytic T)P! "nvestment 7.
,ost entrepreneurs do not have enough money of their own to start their /usinesses. -hen they ac4uire the necessary funds from someone else, a. their consumption e2penditures are /eing financed /y someone else<s saving. /. their consumption e2penditures are /eing financed /y someone else<s investment. c. their investments are /eing financed /y someone else<s saving. d. their saving is /eing financed /y someone else<s investment.
AN ! * D"#! & $%#! &'-: NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! "nvestment + aving , *! "nterpretive
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Sec$( % Saving, Investment, and the Financial System % Financial Instit)ti*ns in the U+S+ Ec*n*my
&ULTI'LE C !ICE 1. At the /roadest level, the financial system moves the economy<s scarce resources from a. the rich to the poor. /. financial institutions to /usiness firms and government. c. households to financial institutions. d. savers to /orrowers.
AN ! D D"#! 1 $%#! &'-1 NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! #inancial system , *! "nterpretive &. The fact that /orrowers sometimes default on their loans /y declaring /an.ruptcy is directly related to the characteristic of a /ond called a. credit ris.. /. interest ris.. c. term ris.. d. private ris.. D"#! 1 $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! Definitional
AN ! A NAT! Analytic T)P! 1onds 0.
-hen a large, well-.nown corporation wishes to /orrow directly from the pu/lic, it can a. sell /onds. /. sell shares of stoc.. c. go to a /an. for a loan. d. All of the a/ove are correct. D"#! 1 $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! "nterpretive
-hich of the following statements a/out the term of a /ond is correctB a. Term refers to the various characteristics of a /ond, including its interest rate and ta2 treatment. /. The term of a /ond is determined entirely /y its credit ris.. c. The term of a /ond is determined entirely /y how much sales charge the /uyer of the /ond pays when he or she purchases the /ond. d. "nterest rates on long-term /onds are usually higher than interest rates on short-term /onds. D"#! & $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! "nterpretive
AN ! D NAT! Analytic T)P! 1onds 5.
-e would e2pect the interest rate on 1ond A to /e higher than the interest rate on 1ond 1 if the two /onds have identical characteristics e2cept that a. the credit ris. associated with 1ond A is lower than the credit ris. associated with 1ond 1. /. 1ond A was issued /y the state of New Eor. and 1ond 1 was issued /y the %22on ,o/il *orporation. c. 1ond A has a term of &: years and 1ond 1 has a term of & years. d. All of the a/ove are correct. D"#! & $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! Applicative
AN ! * NAT! Analytic T)P! 1onds

'. -e would e2pect the interest rate on 1ond A to /e higher than the interest rate on 1ond 1 if the two /onds have identical characteristics e2cept that a. 1ond A was issued /y a financially wea. corporation and 1ond 1 was issued /y a financially strong corporation. /. 1ond A was issued /y the General %lectric *orporation and 1ond 1 was issued /y the state of *alifornia. c. 1ond A has a term of &: years and 1ond 1 has a term of 1 year. d. All of the a/ove are correct. D"#! & $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! Applicative
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As an alternative to selling shares of stoc. as a means of raising funds, a large company could, instead, a. invest in physical capital. /. use e4uity finance. c. sell /onds. d. purchase /onds. D"#! 1 $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! "nterpretive
AN ! * NAT! Analytic T)P! toc. + 1onds 7.
-hich of the following statements is correctB a. The e2pected future profita/ility of a corporation influences the demand for that corporation<s stoc.. /. -hen a corporation sells stoc. as a means of raising funds it is engaging in de/t finance. c. The owners of /onds sold /y the ,icrosoft *orporation are part owners of that corporation. d. All /onds are, /y definition, perpetuities. D"#! & $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! "nterpretive
AN ! A NAT! Analytic T)P! toc. + 1onds 8.
-hich of the following statements is correctB a. A corporation receives a monetary payment every time its shares of stoc. are traded /y stoc.holders on organi@ed stoc. e2changes. /. -hen a corporation sells /onds as a means of raising funds it is engaging in de/t finance. c. A share of stoc. is an ")9. d. The two most important financial mar.ets in the economy are the stoc. mar.et and financial intermediaries. D"#! & $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! "nterpretive
AN ! 1 NAT! Analytic T)P! toc. + 1onds 1:.
The economy<s two most important financial mar.ets are a. the investment mar.et and the saving mar.et. /. the /ond mar.et and the stoc. mar.et. c. /an.s and the stoc. mar.et. d. financial mar.ets and financial institutions.
AN ! 1 D"#! 1 $%#! &'-1 NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! #inancial mar.ets , *! "nterpretive 11. Two of the economy<s most important financial intermediaries are a. suppliers of funds and demanders of funds. /. /an.s and the /ond mar.et. c. the stoc. mar.et and the /ond mar.et. d. /an.s and mutual funds.
AN ! D D"#! 1 $%#! &'-1 NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! #inancial intermediaries , *! "nterpretive
&16
1&.

-e associate the term debt finance with a. the /ond mar.et, and we associate the term equity finance with the stoc. mar.et. /. the stoc. mar.et, and we associate the term equity finance with the /ond mar.et. c. financial intermediaries, and we associate the term equity finance with financial mar.ets. d. financial mar.ets, and we associate the term equity finance with financial intermediaries.
AN ! A D"#! & $%#! &'-1 NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! #inancial mar.ets + #inancial intermediaries , *! "nterpretive 10. A /ond is a a. financial intermediary. /. certificate of inde/tedness. c. certificate of partial ownership in an enterprise. d. None of the a/ove is correct. D"#! 1 $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! Definitional
AN ! 1 NAT! Analytic T)P! 1onds 13.
-hich of the following is a financial-mar.et transactionB a. A saver /uys shares in a mutual fund. /. A saver deposits money into a credit union. c. A saver /uys a /ond a corporation has Dust issued so it can purchase capital. d. None of the a/ove is correct.
AN ! * D"#! & $%#! &'-1 NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! #inancial mar.ets + 1onds , *! "nterpretive 15. A certificate of inde/tedness that specifies the o/ligations of the /orrower to the holder is called a a. /ond. /. stoc.. c. mutual fund. d. All of the a/ove are correct. D"#! 1 $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! Definitional
AN ! A NAT! Analytic T)P! 1onds 1'.
(ong-term /onds are a. ris.ier than short-term /onds, and so interest rates on long-term /onds are usually lower than interest rates on short-term /onds. /. ris.ier than short-term /onds, and so interest rates on long-term /onds are usually higher than interest rates on short-term /onds. c. less ris.y than short-term /onds, and so interest rates on long-term /onds are usually lower than interest rates on short-term /onds. d. less ris.y than short-term /onds, and so interest rates on long-term /onds are usually higher than interest rates on short-term /onds. D"#! & $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! "nterpretive
"f the governmentAs e2penditures e2ceeded its receipts, it would li.ely a. lend money to a /an. or other financial intermediary. /. /orrow money from a /an. or other financial intermediary. c. /uy /onds directly from the pu/lic. d. sell /onds directly to the pu/lic.
AN ! D D"#! & $%#! &'-1 NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! 1onds + #inancial system , *! "nterpretive

17. A national chain of grocery stores wants to finance the construction of several new stores. The firm has limited internal funds, so it li.ely will a. demand the re4uired funds /y /uying /onds. /. demand the re4uired funds /y selling /onds. c. supply the re4uired funds /y /uying /onds. d. supply the re4uired funds /y selling /onds.
&17
AN ! 1 D"#! & $%#! &'-1 NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! "nvestment + 1onds , *! "nterpretive 18. .yline *hili wants to finance the purchase of new e4uipment for its restaurants. The firm has limited internal funds, so .yline li.ely will a. demand funds from the financial system /y /uying /onds. /. demand funds from the financial system /y selling /onds. c. supply funds to the financial system /y /uying /onds. d. supply funds to the financial system /y selling /onds.
AN ! 1 D"#! & $%#! &'-1 NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! "nvestment + 1onds , *! "nterpretive &:. "f Proctor and Gam/le sells a /ond it is a. /orrowing directly from the pu/lic. /. /orrowing indirectly from the pu/lic. c. lending directly to the pu/lic. d. lending indirectly to the pu/lic.
AN ! A D"#! & $%#! &'-1 NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! 1onds + #inancial mar.ets , *! "nterpretive &1. -hich of the following is correctB a. The maturity of a /ond refers to the amount to /e paid /ac.. /. The principal of the /ond refers to the person selling the /ond. c. A /ond /uyer cannot sell a /ond /efore it matures. d. None of the a/ove is correct. D"#! 1 $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! Definitional
AN ! D NAT! Analytic T)P! 1onds &&.
-hich of the following is not correctB a. 1y saving a larger portion of its GDP, a country can raise its output per wor.er. /. avers supply their money to the financial system with the e2pectation that they will get it /ac. with interest at a later date. c. #inancial intermediaries are the only type of financial institution. d. The financial system helps match people<s saving with other people<s /orrowing.
AN ! * D"#! 1 $%#! &'-1 NAT! Analytic ()*! The study of economics, and definitions of economics T)P! #inancial system , *! "nterpretive &0. -hich of the following is not a nonsensical headlineB a. 1ritish perpetuities a/out to mature. /. Disney issues new /onds with term of =1,::: each. c. Government /onds currently pay less interest than corporate /onds. d. tandard and PoorAs Dudges new Dun. /ond to have very low credit ris.. D"#! & $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! "nterpretive
AN ! * NAT! Analytic T)P! 1onds
&18
&3.

The length of time until a /ond matures is called the a. perpetuity. /. term. c. maturity. d. intermediation. D"#! 1 $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! Definitional
AN ! 1 NAT! Analytic T)P! 1onds &5.
A perpetuity is distinguished from other /onds in that it a. pays continuously compounded interest. /. pays interest only when it matures. c. never matures. d. will /e used to purchase another /ond when it matures unless the owner specifies otherwise. D"#! 1 $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! Definitional
AN ! * NAT! Analytic T)P! Perpetuities &'.
-hich of the following is correctB a. ome /onds have terms as short as a few months. /. 1ecause they are so ris.y, Dun. /onds pay a low rate of interest. c. *orporations /uy /onds to raise funds. d. All of the a/ove are correct. D"#! 1 $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! "nterpretive
AN ! A NAT! Analytic T)P! 1onds &6.
-hich of the following is not correctB a. "f you /uy a /ond from a corporation, you can sell the /ond to someone else /efore it matures. /. Term refers to the scheduling of periodic interest rate payments on a /ond. c. A /ond is an ")9. d. There are millions of different /onds in the 9. . economy. D"#! 1 $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! Definitional
AN ! 1 NAT! Analytic T)P! 1onds &7.
A /ond that never matures is .nown as a a. perpetuity. /. an intermediary /ond. c. an inde2ed /ond. d. a Dun. /ond. D"#! 1 $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! Definitional
AN ! A NAT! Analytic T)P! Perpetuities &8.
A /ond /uyer is a a. saver. 1ond /uyers must hold their /onds until maturity. /. saver. 1ond /uyers may sell their /onds prior to maturity. c. /orrower. 1ond /uyers must hold their /onds until maturity. d. /orrower. 1ond /uyers may sell their /onds prior to maturity. D"#! 1 $%#! &'-1 ()*! The study of economics, and definitions of economics , *! Definitional
AN ! 1 NAT! Analytic T)P! 1onds

0:. -hich of the following is correctB a. (enders sell /onds and /orrowers /uy them. /. (ong-term /onds usually pay a lower interest rate than do short-term /onds /ecause long-term /onds are ris.ier. c. The term junk bonds refers to /onds that have /een resold many times. d. None of the a/ove is correct. D"#! & $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! "nterpretive
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hort-term /onds are generally a. less ris.y than long-term /onds and so they feature higher interest rates. /. less ris.y than long-term /onds and so they feature lower interest rates. c. more ris.y than long-term /onds and so they feature higher interest rates. d. more ris.y than long-term /onds and so they feature lower interest rates. D"#! & $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! "nterpretive
AN ! 1 NAT! Analytic T)P! 1onds + $is. 0&.
*ompared to short-term /onds, other things the same, long-term /onds generally have a. more ris. and so they pay higher interest rates. /. less ris. and so they pay lower interest rates. c. less ris. and so they pay higher interest rates. d. a/out the same ris. and so they pay a/out the same interest rate. D"#! & $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! "nterpretive
AN ! A NAT! Analytic T)P! 1onds + $is. 00.
Two /onds have the same term to maturity. The first was issued /y a state government and the pro/a/ility of default is /elieved to /e low. The other was issued /y a corporation and the pro/a/ility of default is /elieved to /e high. -hich of the following is correctB a. 1ecause they have the same term to maturity the interest rates should /e the same. /. 1ecause of the differences in ta2 treatment and credit ris., the state /ond should have the higher interest rate. c. 1ecause of the differences in ta2 treatment and credit ris., the corporate /ond should have the higher interest rate. d. "t is not possi/le to say if one /ond has a higher interest rate than the other.
AN ! * D"#! 0 $%#! &'-1 NAT! Analytic ()*! The study of economics, and definitions of economics T)P! 1onds + "nterest rates , *! Applicative 03. )n which of these /onds is the prospect of default most li.elyB a. a Dun. /ond /. a municipal /ond c. a 9. . government /ond d. a corporate /ond issued /y General %lectric *orporation D"#! & $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! "nterpretive
AN ! A NAT! Analytic T)P! 1onds + $is. 05.
)n which of these /onds is the prospect of default least li.elyB a. a Dun. /ond /. a /ond issued /y the state of Te2as c. a /ond issued /y the federal government d. a /ond issued /y %22on ,o/il *orporation D"#! & $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! "nterpretive
AN ! * NAT! Analytic T)P! 1onds + $is.
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0'.

Assume the /onds /elow have the same term and principal and that the state or local government that issues the municipal /ond has a good credit rating. -hich list has /onds correctly ordered from the one that pays the highest interest rate to the one that pays the lowest interest rateB a. corporate /ond, municipal /ond, 9. . government /ond /. corporate /ond, 9. . government /ond, municipal /ond c. municipal /ond, 9. . government /ond, corporate /ond d. 9. . government /ond, municipal /ond, corporate /ond D"#! & $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! "nterpretive
AN ! 1 NAT! Analytic T)P! 1onds + $is. 06.
)ther things the same, as the maturity of a /ond /ecomes longer, the /ond will pay a. a lower interest rate /ecause it has less ris.. /. a lower interest rate /ecause it has more ris.. c. a higher interest rate /ecause it has more ris.. d. the same interest rate, /ecause there is no relationship /etween term and ris.. D"#! & $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! "nterpretive
AN ! * NAT! Analytic T)P! 1onds + $is. 07.
uppose the issuer of a /ond fails to pay some of the interest or principal that was promised to the /ondholders. This failure is referred to as a a. /reach. /. default. c. ris.. d. term failure. D"#! 1 $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! Definitional
uppose the city of pringfield has a high credit rating, and so when pringfield /orrows funds /y selling /onds, a. the city<s high credit rating and the ta2 status of municipal /onds /oth contri/ute to a lower interest rate than would otherwise apply. /. the city<s high credit rating and the ta2 status of municipal /onds /oth contri/ute to a higher interest rate than would otherwise apply. c. the city<s high credit rating contri/utes to a lower interest rate than would otherwise apply, while the ta2 status of municipal /onds contri/utes to a higher interest rate than would otherwise apply. d. the city<s high credit rating contri/utes to a higher interest rate than would otherwise apply, while the ta2 status of municipal /onds contri/utes to a lower interest rate than would otherwise apply.
AN ! A D"#! & $%#! &'-1 NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! 1onds + "nterest rates , *! Applicative 3:. ,unicipal /onds pay a relatively a. low rate of interest /ecause of their high default ris. and /ecause the interest they pay is su/Dect to federal income ta2. /. low rate of interest /ecause of their low default ris. and /ecause the interest they pay is not su/Dect to federal income ta2. c. high rate of interest /ecause of their high default ris. and /ecause federal ta2es must /e paid on the interest they pay. d. high rate of interest /ecause of their low default ris. and /ecause the interest they pay is not su/Dect to federal income ta2.
AN ! 1 D"#! & $%#! &'-1 NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! 1onds + "nterest rates , *! "nterpretive

31. -hich of the following /ond /uyers did not /uy the /ond that /est met his or her o/DectiveB a. ,ia wanted a /ond with a high interest rate and was willing to ta.e a lot of ris.. he purchased a Dun. /ond. /. Anna wanted a /ond that would let her /est avoid federal income ta2es. he purchased a municipal /ond. c. 1ill wanted to purchase a /ond whose seller was unli.ely to default. >e purchased a /ond that tandards and PoorAs rated a low credit ris.. d. To/y held long-term /onds rather than short-term ones to avoid ris.. D"#! 1 $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! Applicative
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AN ! D NAT! Analytic T)P! 1onds 3&.
Eou hold /onds issued /y the state of )hio. The interest you earn each year on these /onds a. is not su/Dect to federal income ta2 and so these /onds pay a higher interest rate than otherwise compara/le /onds issued /y the 9. . government. /. is not su/Dect to federal income ta2 and so these /onds pay a lower interest rate than otherwise compara/le /onds issued /y the 9. . government. c. is su/Dect to federal income ta2 and so these /onds pay a higher interest rate than otherwise compara/le /onds issued /y the 9. . government. d. is su/Dect to federal income ta2 and so these /onds pay a lower interest rate than otherwise compara/le /onds issued /y the 9. . government.
AN ! 1 D"#! & $%#! &'-1 NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! 1onds + "nterest rates , *! "nterpretive 30. )ther things the same, /onds are li.ely to have higher interest rates if they have a. ta2 e2emptions and short terms. /. ta2 e2emptions and long terms. c. no ta2 e2emptions and short terms. d. no ta2 e2emptions and long terms. 1 $%#! &'-1 , *! Definitional
AN ! D D"#! T)P! "nterest on /onds 33.
)ther things the same, which /ond would you e2pect to pay the highest interest rateB a. a /ond issued /y the 9. . government /. a /ond issued /y "1, c. a /ond issued /y New Eor. tate d. a /ond issued /y a new restaurant chain
AN ! D D"#! 1 $%#! &'-1 NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! 1onds + "nterest rates , *! Applicative 35. )ther things the same, which /ond would you e2pect to pay the lowest interest rateB a. a /ond issued /y a state with a very good credit rating /. a /ond issued /y the 9. . government c. a /ond issued /y a fairly new company doing genetic research d. a /ond issued /y Na/isco
AN ! A D"#! & $%#! &'-1 NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! 1onds + "nterest rates , *! Applicative
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3'.

Eou are thin.ing of /uying a /ond from Knight *orporation. Eou .now that this /ond is long term and you .now that Knight<s /usiness ventures are ris.y and uncertain. Eou then consider another /ond with a shorter term to maturity issued /y a company with good prospects and an esta/lished reputation. -hich of the following is correctB a. The longer term would tend to ma.e the interest rate on the /ond issued /y Knight higher, while the higher ris. would tend to ma.e the interest rate lower. /. The longer term would tend to ma.e the interest rate on the /ond issued /y Knight lower, while the higher ris. would tend to ma.e the interest rate higher. c. 1oth the longer term and the higher ris. would tend to ma.e the interest rate lower on the /ond issued /y Knight. d. 1oth the longer term and the higher ris. would tend to ma.e the interest rate higher on the /ond issued /y Knight.
AN ! D D"#! & $%#! &'-1 NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! 1onds + "nterest rates + $is. , *! Applicative 36. ?erry has the choice of two /onds, one that pays 0 percent interest and one that pays ' percent interest. -hich of the following is most li.elyB a. The ' percent /ond is less ris.y than the 0 percent /ond. /. The ' percent /ond is a 9. . government /ond, and the 0 percent /ond is a Dun. /ond. c. The ' percent /ond has a longer term than the 0 percent /ond. d. The ' percent /ond is a municipal /ond, and the 0 percent /ond is a 9. . government /ond. D"#! & $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! Applicative
AN ! * NAT! Analytic T)P! 1onds + $is. 37.
(acey, a financial advisor, has told her clients the following things. -hich of her statements is not correctB a. C9. . government /onds generally have a higher rate of interest than municipal /onds.C /. CThe interest received on corporate /onds is ta2a/le.C c. C9. . government /onds have the lowest default ris..C d. C"f you purchase a /ond, you must hold it until it matures.C D"#! & $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! Applicative
The sale of stoc.s a. and /onds to raise money is called de/t finance. /. and /onds to raise money is called e4uity finance. c. to raise money is called de/t finance, while the sale of /onds to raise funds is called e4uity finance. d. to raise money is called e4uity finance, while the sale of /onds to raise funds is called de/t finance. D"#! 1 $%#! &'-1 , *! Definitional
AN ! D T)P! 1onds + toc. 5:.
A1* *o. sells newly issued /onds. ?(G *o. sells newly issued stoc.s. -hich company is raising funds in financial mar.etsB a. only A1* /. only ?(G c. /oth A1* and ?(G d. neither A1* nor ?(G D"#! 1 $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! Definitional
AN ! * NAT! Analytic T)P! 1onds + toc. 51.
Papa ,arioAs Pi@@a *ompany sells common stoc.. The company is using a. e4uity financing and the return shareholders earn is fi2ed. /. e4uity financing and the return shareholders earn depends on how profita/le the company is. c. de/t financing and the return shareholders earn is fi2ed. d. de/t financing and the return shareholders earn depends on how profita/le the company is.

AN ! 1 NAT! Analytic T)P! toc. 5&. D"#! 1 $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! "nterpretive
&&3
toc. represents a. a claim to a share of the profits of a firm. /. ownership in a firm. c. e4uity finance. d. All of the a/ove are correct D"#! 1 $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! Definitional
AN ! D NAT! Analytic T)P! toc. 50.
The /ond mar.et a. is a financial mar.et, whereas the stoc. mar.et is a financial intermediary. /. is a financial intermediary, whereas the stoc. mar.et is a financial mar.et. c. is a financial mar.et, as is the stoc. mar.et. d. is a financial intermediary, as is the stoc. mar.et.
AN ! * D"#! & $%#! &'-1 NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! 1ond mar.et, stoc. mar.et , *! Definitional 53. -hich of the following would li.ely ma.e the interest rate on a /ond higher than otherwiseB a. /oth high credit ris. and a long term /. high credit ris. /ut not a long term c. a long term /ut not a high credit ris. d. neither high credit ris. nor a long term
AN ! A D"#! 1 $%#! &'-1 NAT! Analytic ()*! The study of economics, and definitions of economics T)P! 1onds + "nterest rates , *! Definitional 55. People who /uy newly issued stoc. in a corporation such as *rate and 1arrel provide a. de/t finance and so /ecome part owners of *rate and 1arrel. /. de/t finance and so /ecome creditors of *rate and 1arrel. c. e4uity finance and so /ecome part owners of *rate and 1arrel. d. e4uity finance and so /ecome creditors of *rate and 1arrel. D"#! 1 $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! Definitional
AN ! * NAT! Analytic T)P! toc. 5'.
People who /uy stoc. in a corporation such as General %lectric /ecome a. creditors of General %lectric, so the /enefits of holding the stoc. depend on General %lectricAs profits. /. creditors of General %lectric, /ut the /enefits of holding the stoc. do not depend on General %lectricAs profits. c. part owners of General %lectric, so the /enefits of holding the stoc. depend on General %lectricAs profits. d. part owners of General %lectric, /ut the /enefits of holding the stoc. do not depend on General %lectricAs profits. D"#! 1 $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! "nterpretive
AN ! * NAT! Analytic T)P! toc. 56.
"f >uedepool 1eer runs into financial difficulty, the stoc.holders as a. part owners of >uedepool are paid /efore /ondholders get paid anything at all. /. part owners of >uedepool are paid after /ondholders get paid. c. creditors of >uedepool are paid /efore /ondholders get paid anything at all. d. creditors of >uedepool are paid after /ondholders get paid.
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D"#! 1 $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! "nterpretive
AN ! 1 NAT! Analytic T)P! toc. 57.
As chief financial officer you sell newly issued /onds on /ehalf of your firm. Eour firm is a. /orrowing directly. /. /orrowing indirectly. c. lending directly. d. lending indirectly. D"#! 1 $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! Definitional
-hich of the following people purchased the correct asset to meet his or her o/DectiveB a. ,ichelle wanted to /e a part owner of ,amma $osaAs Pi@@a, so she purchased a /ond issued /y ,amma $osaAs Pi@@a. /. Tim wanted a high return, even if it meant ta.ing some ris., so he purchased stoc. issued /y pecific %lectric instead of /onds issued /y pecific %lectric. c. ?ennifer wanted to /uy e4uity in >onda, so she purchased /onds sold /y >onda. d. All of the a/ove are correct. D"#! 1 $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! "nterpretive
AN ! 1 NAT! Analytic T)P! 1onds + toc. ':.
"f a firm sells a total of 1:: shares of stoc., then a. each share represents 1 percent of the firm<s inde/tedness. /. each share represents ownership of 1 percent of the firm. c. the firm is engaging in de/t finance. d. the firm is engaging in term finance. D"#! 1 $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! "nterpretive
AN ! 1 NAT! Analytic T)P! toc. '1.
The prices of stoc. traded on e2changes are determined /y a. the *orporate toc. Administration. /. the administrators of NA DAL. c. the supply of, and demand for, the stoc.. d. All of the a/ove are correct. D"#! 1 $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! "nterpretive
AN ! * NAT! Analytic T)P! toc. '&.
-hich of the following is not an important stoc. e2change in the 9nited tatesB a. New Eor. toc. %2change /. American toc. %2change c. *hicago ,ercantile %2change d. NA DAL D"#! 1 $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! Definitional
AN ! * NAT! Analytic T)P! toc. mar.et '0.
All else e4ual, when people /ecome more optimistic a/out a companyAs future, the a. supply of the stoc. and the price will /oth rise. /. supply of the stoc. and the price will /oth fall. c. demand for the stoc. and the price will /oth rise. d. demand for the stoc. and the price will /oth fall. D"#! & $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! Analytical
AN ! * NAT! Analytic T)P! toc.

'3.
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uppose the government finds a maDor defect in one of a companyAs products and demands that the product /e ta.en off the mar.et. -e would e2pect that the a. supply of e2isting shares of the stoc. and the price will /oth rise. /. supply of e2isting shares of the stoc. and the price will /oth fall. c. demand for e2isting shares of the stoc. and the price will /oth rise. d. demand for e2isting shares of the stoc. and the price will /oth fall. D"#! & $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! Analytical
AN ! D NAT! Analytic T)P! toc. '5.
-orld -ide Delivery ervice *orporation develops a way to speed up its deliveries and reduce its costs. -e would e2pect that this would a. raise the demand for e2isting shares of the stoc., causing the price to rise. /. decrease the demand for e2isting shares of the stoc., causing the price to fall. c. raise the supply of the e2isting shares of stoc., causing the price to rise. d. raise the supply of the e2isting shares of stoc., causing the price to fall. D"#! & $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! Analytical
AN ! A NAT! Analytic T)P! toc. ''.
"n the late summer of &::5 some regions of the country were suffering from drought. -hat effect would we e2pect this to have on the stoc. of companies such as ?ohn Deere that manufacture farm e4uipmentB a. raise the demand for e2isting shares of the stoc., causing the price to rise /. decrease the demand for e2isting shares of the stoc., causing the price to fall c. raise the supply of the e2isting shares of stoc., causing the price to rise d. raise the supply of the e2isting shares of stoc., causing the price to fall D"#! & $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! Analytical
AN ! 1 NAT! Analytic T)P! toc. '6.
"n the *oen 1rothers< movie The Hudsucker ro!y the /oard of directors pic.s someone to run the company who they /elieve will ma.e poor decisions. "f things turn out as they plan, a. the price of a share of stoc. in the >udsuc.er corporation should decline as the demand for shares falls. /. the price of a share of stoc. in the >udsuc.er corporation should rise as the demand for shares rises. c. the price of a share of stoc. in the >udsuc.er corporation should decline as the supply of e2isting shares falls. d. the price of a share of stoc. in the >udsuc.er corporation should rise as the supply of e2isting shares rises. D"#! & $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! Analytical
AN ! A NAT! Analytic T)P! toc. '7.
uppose that the tires of a certain tire manufacturer are discovered to /e defective. )ther things the same, this news would cause a. the demand for this company<s stoc. to decrease, so the price would rise. /. the demand for this company<s stoc. to decrease, so the price would fall. c. the supply of this company<s stoc. to decrease, so the price would fall. d. the supply of this company<s stoc. to decrease, so the price would rise. D"#! & $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! Analytical
AN ! 1 NAT! Analytic T)P! toc.
&&6
'8.

Nastech Pharmaceuticals announced it has developed a nasal spray that would reduce hunger cravings. )ther things the same we would e2pect a. the demand for e2isting shares of stoc. in this company to decrease, so the price would fall. /. the demand for e2isting shares of stoc. in this company to increase, so the price would rise. c. the supply of e2isting shares of stoc. in this company to decrease, so the price would fall. d. the supply of e2isting shares of stoc. in this company to increase, so the price would rise. D"#! & $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! Analytical
AN ! 1 NAT! Analytic T)P! toc. 6:.
)ther things /eing constant, when a firm sells new shares of stoc., the a. supply of the stoc. increases and the price decreases as a result. /. supply of the stoc. decreases and the price increases as a result. c. demand for the stoc. increases and the price increases as a result. d. demand for the stoc. decreases and the price decreases as a result. D"#! & $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! "nterpretive
AN ! A NAT! Analytic T)P! toc. 61.
-hich of the following is a certificate of inde/tednessB a. stoc.s and /onds /. stoc.s /ut not /onds c. /onds /ut not stoc.s d. neither stoc.s nor /onds
AN ! * D"#! 1 $%#! &'-1 NAT! Analytic ()*! The study of economics, and definitions of economics T)P! 1onds + toc.s , *! Definitional 6&. *ompared to stoc.s, /onds offer the holder a. lower ris. and lower potential return. /. lower ris. and higher potential return. c. higher ris. and lower potential return. d. higher ris. and higher potential return. D"#! & $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! "nterpretive
AN ! A NAT! Analytic T)P! 1onds, toc. 60.
-hich of the following statements is correctB a. A general, persistent decline in stoc. prices may signal that the economy is a/out to enter a /oom period /ecause people will /e a/le to /uy stoc. for less money. /. A general, persistent decline in stoc. prices may signal that the economy is a/out to enter a recession /ecause low stoc. prices may mean that people are e2pecting low corporate profits. c. A general, persistent decline in stoc. prices may signal that the economy is a/out to enter a recession /ecause low stoc. prices mean that corporations have had low profits in the past. d. %2pectations a/out the /usiness cycle have no impact on stoc. prices. D"#! & $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! Analytical
A stock inde! is a. an average of a group of stoc. prices. /. an average of a group of stoc. yields. c. a measure of the ris. relative to the profita/ility of corporations. d. a report in a newspaper or other media outlet on the price of the stoc. and earnings of the corporation that issued the stoc.. D"#! 1 $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! Definitional
AN ! A NAT! Analytic T)P! toc. inde2es

65. The Dow ?ones "ndustrial Average has /een computed regularly since a. 186'. /. 1837. c. 1810. d. 178'. D"#! 1 $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! Definitional
&&7
AN ! D NAT! Analytic T)P! toc. inde2es 6'.
The Dow ?ones "ndustrial Average is now /ased on the prices of the stoc.s of a. 0: maDor 9. . corporations. /. 1:: maDor 9. . corporations. c. 5:: representative 9. . corporations. d. 1,::: representative 9. . corporations. D"#! 1 $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! Definitional
AN ! A NAT! Analytic T)P! toc. inde2es 66.
The single most important piece of information a/out a stoc. is its a. term. /. dividend. c. daily volume. d. price. D"#! 1 $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! "nterpretive
Potential /uyers of A1* *orporation /onds are not concerned a/out A1* *orporation declaring /an.ruptcy. Potential /uyers of MEN *orporation /onds are concerned that MEN *orporation may declare /an.ruptcy. -hich of the following statements is correctB a. )ther things e4ual, the interest rate on MEN *orporation /onds will /e high relative to the interest rate on A1* *orporation /onds. /. An A1* *orporation /ond is a perpetuity, whereas an MEN *orporation /ond is not a perpetuity. c. MEN *orporation /onds carry more interest-rate ris. than do A1* *orporation /onds. d. All of the a/ove are correct. D"#! & $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! "nterpretive
*ompared to /ondholders, stoc.holders a. face higher ris. and have the potential for higher returns. /. face higher ris. /ut receive a fi2ed payment. c. face lower ris. and have the potential for higher returns. d. face lower ris. /ut receive a fi2ed payment. D"#! 1 $%#! &'-1 ()*! The study of economics, and definitions of economics , *! "nterpretive
AN ! A NAT! Analytic T)P! 1onds + toc. 7:.
After a corporation issues stoc., the stoc. a. can not /e resold. /. can /e resold only if the corporation wants to /uy it /ac.. c. can /e resold on e2changesO the resale will raise additional funds for the corporation. d. None of the a/ove are correct. D"#! & $%#! &'-1 ()*! The study of economics, and definitions of economics , *! Definitional
AN ! D NAT! Analytic T)P! toc.
&&8
71.

A high demand for a company<s stoc. is an indication that a. the company is in need of funds. /. the company has recently sold a large 4uantity of /onds. c. people are optimistic a/out the company<s future. d. people are pessimistic a/out the company<s future. D"#! & $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! "nterpretive
AN ! * NAT! Analytic T)P! toc. 7&.
The price of a stoc. will rise if a. the managers of a stoc. e2change decide the price should /e higher. /. the demand for the stoc. rises. c. the supply of the stoc. rises. d. None of the a/ove are correct. D"#! & $%#! &'-1 ()*! The study of economics, and definitions of economics , *! "nterpretive
Folume, as reported in stoc. ta/les, refers to the a. num/er of shares traded. /. percentage of shares outstanding traded. c. num/er of shares traded times the price they sold at. d. num/er of shares of a company traded divided /y the shares of all companies traded. D"#! 1 $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! Definitional
AN ! A NAT! Analytic T)P! toc. 73.
A corporation<s earnings are the amount of revenue it receives for the sale of its products a. minus its cost of production as measured /y its accountants. %arnings must /e paid out as dividends. /. minus its cost of production as measured /y its accountants. %arnings may /e paid out as dividends or retained /y the corporation. c. minus its direct and indirect costs as measured /y its economists. %arnings must /e paid out as dividends. d. minus its direct and indirect cost as measure /y its economists. %arnings may /e paid out as dividends or retained /y the corporation.
AN ! 1 D"#! & $%#! &'-& NAT! Analytic ()*! The study of economics, and definitions of economics T)P! Dividends + toc. , *! Definitional 75. All or part of a firm<s profits may /e paid out to the firm<s stoc.holders in the form of a. retained earnings. /. dividends. c. interest payments. d. capital accounts. D"#! 1 $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! Definitional
AN ! 1 NAT! Analytic T)P! Dividends 7'.
Profits not paid out to stoc.holders are a. retained earnings. /. .nown as dividends. c. the denominator in the price-earnings ratio. d. All of the a/ove are correct. D"#! 1 $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! Definitional
AN ! A NAT! Analytic T)P! toc.

76. A stoc.<s dividend yield is the a. dividend as a percentage of the price per share. /. stoc. price as a percentage of the dividend. c. dividend as a percentage of the retained earnings per share. d. retained earnings per share as the percentage of the dividend. D"#! 1 $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! Definitional
&0:
AN ! A NAT! Analytic T)P! Dividends 77.
A particular stoc. pays an annual dividend of =& per share and the annual dividend yield is 3 percent. The price of a share of this stoc. is a. =&.:7. /. =5.::. c. =7.:: d. =5:.::. D"#! 1 $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! "nterpretive
AN ! D NAT! Analytic T)P! Dividends 78.
"n &::7, MEN *orporation had total earnings of =&:: million and 5: million shares of the corporation<s stoc. were outstanding. "f the price-earnings ratio for MEN is &:, then what is the price of a share of its stoc.B a. =5 /. =1: c. =7: d. =5:: D"#! & $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! Applicative
AN ! * NAT! Analytic T)P! toc. 8:.
"n &::7, *DN *orporation had total earnings of =5:: million and *DN retained 0: percent of its earnings for future investments. "f the price of a share of *DN stoc. is =6: and if 7: million shares of its stoc. were outstanding, then what is the price-earnings ratioB a. :.13 /. 11.& c. 1'.: d. 06.0 D"#! 0 $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! Applicative
The num/er of shares of 1iggie *orporation stoc. outstanding in &::6 was 1:: million. "n &::6, 1iggie stoc. paid a dividend of =&.3: per share and its dividend yield was 3 percent. "f the price-earnings ratio is 1', then 1iggie<s total earnings in &::6 amounted to a. =1.8& million. /. =76.5: million. c. =065.:: million. d. =8':.:: million. D"#! 0 $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! Applicative
AN ! * NAT! Analytic T)P! toc. 8&.
*amp *ompany had total earnings of =':: million in &::7, out of which it retained =15: million for future investments. "n &::7, its stoc. featured a dividend yield of 0 percent and &:: million shares were outstanding. The price-earnings ratio for *amp *ompany stoc. was a. 7.00. /. 1&.::. c. 1'.'6. d. &5.::.
&01

D"#! 0 $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! Applicative
#ortunade *orporation stoc. has a price of =1:: per share, a dividend of =1.': per share, and retained earnings of =&.:: per share. The dividend yield on this stoc. is a. &.7 percent. /. &.: percent. c. 1.' percent. d. :.3 percent. D"#! & $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! Applicative
AN ! * NAT! Analytic T)P! Dividends 83.
Lueen *ity ausage stoc. is selling at =3: per share, it has retained earnings of =&.:: per share and dividends of =.5: per share. -hat is the price-earnings ratio and what is the dividend yieldB a. &:, 1.&5 percent /. &:, '.&5 percent c. 1', 1.&5 percent d. None of the a/ove is correct. D"#! 0 $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! Analytical
AN ! * NAT! Analytic T)P! toc. 85.
toc. in *reole *uisine $estaurants is selling at =&5 per share. *reole *uisine had earnings of =5 a share and a dividend yield of 5 percent. The dividend is a. =:.&5 and the price-earnings ratio is 5. /. =.&5 and the price-earnings ratio is '.6. c. =1.&5 and the price-earnings ratio is 5. d. =1.&5 and the price-earnings ratio is '.6. D"#! & $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! Applicative
AN ! * NAT! Analytic T)P! toc. 8'.
toc. in Tasty Greens $estaurants is selling at =7: per share with 1 million shares outstanding. (ast year, Tasty Greens earned =5 million, of which it retained =1 million for future investments. The dividend yield on the stoc. is a. 1 percent. /. & percent. c. 3 percent. d. 5 percent.
AN ! D D"#! & $%#! &'-1 NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! toc. + Dividends , *! Applicative 86. 1us.in<s *orporation has issued & million shares of stoc.. "ts earnings were =1: million, of which it retained =' million. -hat was the dividend per shareB a. =&. /. =0. c. =5 d. None of the a/ove is correct. D"#! & $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! Analytical
AN ! A NAT! Analytic T)P! Dividends

87.
&0&
)ver-the-$hine *heese *orporation had a P;% ratio of &:, retained earnings of =1.5: per share and a dividend of =.5:. -hat was its dividend yieldB a. 1.&5P /. 1.'6P c. 0.00P d. 6.5:P D"#! 0 $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! Analytical
AN ! A NAT! Analytic T)P! Dividends 88.
Dependa/le Appliances had a P;% ratio of &5, earnings per share of =3, and retained earnings per share of =0. -hat was its dividend yieldB a. 3P /. 0P c. 1P d. None of the a/ove is correct. D"#! & $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! Analytical
AN ! * NAT! Analytic T)P! Dividends
1::. MD# *orp. had a price-earnings ratio of 15, paid a dividend of =1, and retained earnings of =& a share. -hat was the price of a share of MD# stoc.B a. =15 /. =0: c. =35 d. None of the a/ove is correct. AN ! * NAT! Analytic T)P! toc. D"#! & $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! Applicative
1:1. Thomas Pu/lishing has a share price of =&7, retained earnings of =:.': per share, and a dividend yield of 5 percent. -hat is its price-earnings ratioB a. &3 /. 1' c. 13 d. 1& AN ! * NAT! Analytic T)P! toc. D"#! & $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! Analytical
1:&. A corporationAs earnings are a. the amount of revenue it receives for the sale of its products minus its costs of production as measured /y its accountants minus the dividends paid out. /. the amount of revenue it receives for the sale of its products minus its direct and indirect costs of production as measured /y its economists minus the dividends paid out. c. the amount of revenue it receives for the sale of its products minus its costs of production as measured /y its accountants. d. the amount of revenue it receives for the sale of its products minus its direct and indirect costs of production as measured /y its economists. AN ! * NAT! Analytic T)P! Profits D"#! & $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! Definitional
1:0. $etained earnings are a. earnings of a company that are not paid out to stoc.holders. /. the amount of revenue a corporation receives for the sale of its products minus its costs of production as measured /y its accountants. c. the single most important piece of information a/out a stoc.. d. computed /y multiplying the dividend yield /y the price of the stoc..
&00

D"#! 1 $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! "nterpretive
AN ! A NAT! Analytic T)P! Profits
1:3. The amount of revenue a firm receives for the sale of its products minus its costs of production as measured /y its accountants is the firmAs a. earnings. /. retained earnings. c. economic, or real, profit. d. dividend. AN ! A NAT! Analytic T)P! Profits D"#! 1 $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! Definitional
1:5. >istorically, the typical price-earnings ratio for stoc.s is a/out a. 0 /. 7 c. 15 d. &' AN ! * NAT! Analytic T)P! toc. D"#! 1 $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! Definitional
1:'. A high price-earnings ratio for a stoc. indicates that either the stoc. is a. undervalued or people are relatively optimistic a/out the corporationAs prospects. /. overvalued or people are relatively optimistic a/out the corporationAs prospects. c. overvalued or people are relatively pessimistic a/out the corporationAs prospects. d. undervalued or people are relatively pessimistic a/out the corporationAs prospects. AN ! 1 NAT! Analytic T)P! toc. D"#! 1 $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! "nterpretive
1:6. A low price-earnings ratio indicates that either the stoc. is a. undervalued or people are relatively optimistic a/out the corporationAs prospects. /. overvalued or people are relatively optimistic a/out the corporationAs prospects. c. overvalued or people are relatively pessimistic a/out the corporationAs prospects. d. undervalued or people are relatively pessimistic a/out the corporationAs prospects. AN ! D NAT! Analytic T)P! toc. D"#! 1 $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! "nterpretive
1:7. Pac.n*amp *orporation has a stoc. price of =5:, has issued &,:::,::: shares of stoc., has retained earnings of =3 million dollars, and a dividend yield of 3 percent. The price-earnings ratio of Pac.n*amp is a. &5, which is high compared to historical standards of the mar.et. /. &5, which is low compared to historical standards of the mar.et. c. 1&.5, which is low compared to historical standards of the mar.et. d. 1&.5, which is high compared to historical standards of the mar.et. AN ! * NAT! Analytic T)P! toc. D"#! 0 $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! Analytical
1:8. ,etals, "nc. has a price of =&: a share, outstanding shares of &.5 million, retained earnings of =1 million dollars, and a dividend yield of & percent. "t has a price-earnings ratio of a. 5:, which is high /y historical standards. /. 5:, which is low /y historical standards. c. &5, which is high /y historical standards. d. &5, which is low /y historical standards.

AN ! * NAT! Analytic T)P! toc. D"#! 0 $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! Analytical
&03
11:. Neta *orporation has a price of =&: a share, outstanding shares of &.5 million, retained earnings of =1 million dollars, and a dividend yield of 1 percent. "t has a price-earnings ratio which is a. high, perhaps indicating that people e2pect future earnings to rise. /. high, perhaps indicating that people e2pect future earnings to fall. c. low, perhaps indicating that people e2pect future earnings to rise. d. low, perhaps indicating that people e2pect future earnings to fall. AN ! A NAT! Analytic T)P! toc. D"#! & $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! Analytical
111. A low P;% for a stoc. indicates that a. people may e2pect earnings to fall in the future, perhaps /ecause the firm will /e faced with increased competition. /. its dividends have /een low so that no one is willing to pay very much for it. c. the corporation is possi/ly overvalued. d. All of the a/ove are correct. AN ! A NAT! Analytic T)P! toc. 11&. D"#! 1 $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! "nterpretive
uppose arah (ee *orporation stoc. has a P;% ratio of 7. This P;% ratio is relatively a. low, indicating that /uyers may e2pect earnings to rise. /. low, indicating that /uyers may e2pect earnings to fall. c. high, indicating that /uyers may e2pect earnings to rise. d. high, indicating that /uyers may e2pect earnings to fall. D"#! & $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! "nterpretive
AN ! 1 NAT! Analytic T)P! toc.
110. -hich of the following is correctB a. ?oan ta.es some of her income and /uys mutual fund shares. ?oan<s purchase will /e included in the investment category of GDP. /. "f a share of stoc. in Firtual Pi@@a *orporation sells for =66, the earnings per share are =5, and the dividend per share is =&, then the P;% ratio is 11. c. "n order to use e4uity finance, a firm must sell a/out e4ual values of stoc.s and /onds. d. None of the a/ove is correct. AN ! D NAT! Analytic T)P! toc. Table 26-1 St*c, Gen,ills Gillette Graco >ershey D"#! & $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! Applicative
9se the following ta/le to answer the following 4uestions. Sym G" G GGG > E -ld . &.5 &.& 1.& &.1 '/E 05 01 1' 07 /*l ($$s 10657 0:3&7 6:5 5317 i 33.0 01.1 &3.& '0.3 L* 30.5 &8.6 &0.1 '1.6 Cl*se 30.86 0: &0.85 '&.35 "et Chg+ Q:.'0 :.16 Q:.50 :.6&
113. Re0er t* Ta1le 26%(. "n dollar terms, which company paid the highest dividend per shareB a. Gen,ills /. Gillette c. Graco d. >ershey
&05

D"#! 0 $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! Applicative
AN ! D NAT! Analytic T)P! Dividends
115. Re0er t* Ta1le 26%(. -hat was >ersheyAs earnings per shareB a. =07 /. =1.'3 c. =1.01 d. =:.'1 AN ! 1 NAT! Analytic T)P! toc. D"#! 0 $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! Applicative
11'. Re0er t* Ta1le 26%(. Assume that the closing price was also the average price at which each stoc. transaction too. place. -hat was the total dollar volume of Gillette stoc. traded that dayB a. =81&,73:,::: /. =81,&73,::: c. =8,1&7,3:: d. =81&,73: AN ! 1 NAT! Analytic T)P! toc. D"#! & $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! Applicative
116. Re0er t* Ta1le 26%(. -hich firm had the P;% ratio that was closest to the historically typical P;% ratioB a. Gen,ills /. Gillette c. Graco d. >ershey AN ! * NAT! Analytic T)P! toc. Table 26-2 St*c, 1oeing *o. %li (ily and *o. >. ?. >eni@ and *o. Kellog *o. D"#! & $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! Definitional
9se the following ta/le to answer the following 4uestions. Sym 1A ((E >NN K -ld . 1.55 &.': 0.0: &.&& '/E 0:.37 &8.61 15.00 &:.5: /*l ($$s 3,501,':: 0,6'5,6:: 1,05:,&:: 1,88:,':: i '3.67 57.87 0'.55 35.6& L* '0.6: 57.&1 0'.&' 35.&: Cl*se '3.'& 57.5& 0'.00 35.5: "et Chg+ R.80 R.1' R.&1 R.&3
117. Re0er t* Ta1le 26%2+ -hich company had the highest dollar dividendB a. 1oeing *o. /. %li (illy and *o. c. >. ?. >ein@ and *o. d. Kellog *o. AN ! 1 NAT! Analytic T)P! toc. D"#! & $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! Applicative
118. Re0er t* Ta1le 26%2+ -hich company had the lowest dollar dividendB a. 1oeing *o. /. %li (illy and *o. c. >. ?. >ein@ and *o. d. Kellog *o. AN ! A NAT! Analytic T)P! toc. D"#! & $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! Applicative

1&:. Re0er t* Ta1le 26%2+ -hich company had the highest earnings per shareB a. 1oeing *o. /. %li (illy and *o. c. >. ?. >ein@ and *o. d. Kellog *o. AN ! * NAT! Analytic T)P! toc. D"#! 0 $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! Applicative
&0'
1&1. Re0er t* Ta1le 26%2+ -hich company had the lowest earnings per shareB a. 1oeing *o. /. %li (illy and *o. c. >. ?. >ein@ and *o. d. Kellog *o. AN ! 1 NAT! Analytic T)P! toc. D"#! 0 $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! Applicative
1&&. Re0er t* Ta1le 26%2+ #or which company<s stoc. is the P;% ratio closest to what is historically typicalB a. 1oeing *o. /. %li (illy and *o. c. >. ?. >ein@ and *o. d. Kellog *o. AN ! * NAT! Analytic T)P! toc. D"#! & $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! Applicative
1&0. #inancial intermediaries are a. the same as financial mar.ets. /. individuals who ma.e profits /y /uying a stoc. low and selling it high. c. a more general name for financial assets such as stoc.s, /onds, and chec.ing accounts. d. financial institutions through which savers can indirectly provide funds to /orrowers. AN ! D D"#! 1 $%#! &'-1 NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! #inancial intermediaries , *! Definitional 1&3. -hich of the following is /oth a financial institution and a financial intermediaryB a. /an.s /. stoc. e2changes c. the /ond mar.et d. All of the a/ove are correct. AN ! A D"#! 1 $%#! &'-1 NAT! Analytic ()*! The study of economics, and definitions of economics T)P! #inancial intermediaries + #inancial institutions , *! Definitional 1&5. -hich of the following statements is correctB a. toc.s, /onds, and deposits are all similar in that each provides a common medium of e2change. /. ,ost /uyers of stoc.s and /onds prefer those issued /y large and familiar companies. c. 1an.s charge /orrowers a slightly lower interest rate than they pay to depositors. d. None of the a/ove is correct. AN ! 1 D"#! 1 $%#! &'-1 NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! toc. + 1onds + 1an.s , *! "nterpretive 1&'. -hich of the following is a financial intermediaryB a. a mutual fund /. the stoc. mar.et c. a 9. . government /ond d. a wealthy individual who regularly /uys and holds large 4uantities of government /onds
&06
AN ! A D"#! 1 $%#! &'-1 NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! #inancial intermediaries , *! Definitional 1&6. -hich of the following are financial intermediariesB a. /oth /an.s and mutual funds /. /an.s /ut not mutual funds c. mutual funds /ut not /an.s d. neither /an.s or mutual funds AN ! A D"#! 1 $%#! &'-1 NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! #inancial intermediaries , *! Definitional 1&7. -hich of the following is an e2ample of financial intermediationB a. usan /uys shares of stoc. issued /y a fast food company. /. A foreign government /uys /onds issued /y the 9. . Treasury. c. ?ohn ma.es a deposit at a /an. and the /an. uses this money to ma.e an auto loan to (u.e. d. None of the a/ove is correct. AN ! * D"#! 1 $%#! &'-1 NAT! Analytic ()*! The study of economics, and definitions of economics T)P! #inancial intermediaries , *! "nterpretive 1&8. -hich of the following statements is correctB a. A large, well-.nown corporation such as Proctor and Gam/le would generally use financial intermediation to finance e2pansion of its factories. /. )n average, inde2ed funds outperform managed funds. c. 9nli.e corporate /onds and stoc.s, chec.ing accounts are a store of value. d. #inancial intermediaries are institutions through which savers can directly provide funds to /orrowers. AN ! 1 D"#! & $%#! &'-1 NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! #inancial intermediaries , *! "nterpretive 10:. -hich of the following statements is correctB a. A large, well-.nown corporation such as "ntel generally would use financial intermediation to finance e2pansion of its facilities. /. )n average, managed funds outperform inde2ed funds. c. 9nli.e corporate /onds and stoc.s, chec.ing accounts are a medium of e2change. d. A mutual fund is a financial mar.et. AN ! * D"#! & $%#! &'-1 NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! ,edium of e2change , *! "nterpretive 101. -hich of the following is /oth a store of value and a common medium of e2changeB a. corporate /onds /. mutual funds c. chec.ing account /alances d. All of the a/ove are correct. AN ! * D"#! & $%#! &'-1 NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! tore of value + ,edium of e2change , *! "nterpretive 10&. A chec.ing deposit functions as a. a medium of e2change and as a store of value. /. a medium of e2change, /ut not as a store of value. c. a store of value, /ut not as a medium of e2change. d. neither a medium of e2change nor as a store of value.

AN ! A D"#! & $%#! &'-1 NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! tore of value + ,edium of e2change , *! "nterpretive 100. "n addition to a. performing financial intermediation, /an.s are important in that they help create a medium of e2change. /. serving as financial mar.ets, mutual funds are important in that they help create a store of value. c. serving as stores of value, stoc.s and /onds also serve as media of e2change. d. All of the a/ove are correct. AN ! A D"#! & $%#! &'-1 NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! ,edium of e2change , *! "nterpretive 103. toc.s and /onds a. and chec.ing accounts are all stores of value and commonly function as mediums of e2change. /. and chec.ing accounts are all stores of value, /ut only stoc.s and /onds commonly function as mediums of e2change. c. and chec.ing accounts are all stores of value, /ut only chec.ing accounts commonly function as mediums of e2change. d. and chec.ing accounts all commonly function as mediums of e2change, /ut only stoc.s and /onds are a store of value.
&07
AN ! * D"#! & $%#! &'-1 NAT! Analytic ()*! The study of economics, and definitions of economics T)P! 1onds + ,edium of e2change + toc.s + tore of value , *! "nterpretive 105. A 9. . Treasury /ond is a a. store of value and common medium of e2change. /. store of value, /ut not a common medium of e2change. c. a common medium of e2change, /ut not a store of value. d. neither a store of value nor a common medium of e2change. AN ! 1 D"#! & $%#! &'-1 NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! tore of value + ,edium of e2change , *! "nterpretive 10'. A mutual fund a. is a financial mar.et where small firms mutually agree to sell stoc.s and /onds to raise funds. /. is funds set aside /y local governments to lend to small firms who want to invest in proDects that are mutually /eneficial to the firm and community. c. sells stoc.s and /onds on /ehalf of small and less .nown firms who would otherwise have to pay high interest to o/tain credit. d. is an institution that sells shares to the pu/lic and uses the proceeds to /uy a selection of various types of stoc.s, /onds, or /oth stoc.s and /onds. AN ! D NAT! Analytic T)P! ,utual funds D"#! 1 $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! Definitional
106. "t is claimed that mutual funds have two advantages. The first is that mutual funds allow people with small amounts of money to diversify. The second is that mutual funds provide the s.ills of professional money managers who /uy stoc.s they /elieve will /e the most profita/le and there/y increase the return that mutual fund depositors earn on their savings. a. %conomists strongly agree with /oth claims. /. %conomists are s.eptical of /oth claims. c. %conomists are s.eptical of the first claim, /ut strongly agree with the second. d. %conomists strongly agree with the first claim, /ut are s.eptical of the second. AN ! D NAT! Analytic T)P! ,utual funds D"#! & $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! "nterpretive
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107. The primary advantage of mutual funds is that they a. always ma.e a return that C/eats the mar.et.C /. allow people with small amounts of money to diversify. c. provide customers with a medium of e2change. d. All of the a/ove are correct. AN ! 1 D"#! & $%#! &'-1 NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! ,utual funds + Diversification , *! Definitional 108. The old adage, SDon<t put all your eggs in one /as.et,T is very similar to a modern /it of advice concerning financial matters! a. S1uy low-ris. /onds.T /. S9se a medium of e2change.T c. SDiversify.T d. S"ntermediate.T AN ! * D"#! 1 $%#! &'-1 NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! Diversification , *! "nterpretive 13:. As a money management fee, mutual funds usually charge their customers a. /etween :.5 and &.: percent of assets each year. /. /etween 1.5 and 0.: percent of assets each year. c. nothing, /ecause they receive commissions from the firms whose stoc. they /uy. d. a flat fee of a/out =5:. AN ! A NAT! Analytic T)P! ,utual funds D"#! & $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! Definitional
131. "t is claimed that a secondary advantage of mutual funds is that a. an investor can avoid investment charges and fees. /. they give ordinary people access to loana/le funds for investing. c. they usually outperform stoc. mar.et inde2es. d. they give ordinary people access to the s.ills of professional money managers. AN ! D NAT! Analytic T)P! ,utual funds D"#! 1 $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! "nterpretive
13&. "nde2 funds a. typically have a higher rate of return and higher costs than managed mutual funds. /. typically have a higher rate of return and lower costs than managed mutual funds. c. typically have a lower rate of return and higher costs than managed mutual funds. d. typically have a lower rate of return and lower costs than managed mutual funds. AN ! 1 D"#! 1 $%#! &'-1 NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! ,utual funds + "nde2 funds , *! "nterpretive 130. "nde2 funds a. /uy all the stoc.s in a given stoc. inde2. /. promise to /eat the mar.et /y a certain percentage .nown as an inde2. c. provide a return that is adDusted for changes in the consumer price inde2. d. /uy industries within a particular category of the North American "ndustry *lassification ystem. AN ! A NAT! Analytic T)P! "nde2 funds D"#! 1 $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! Definitional

133. ,anaged funds a. typically have a higher rate of return and higher costs than inde2 funds. /. typically have a higher rate of return and lower costs than inde2 funds. c. typically have a lower rate of return and higher costs than inde2 funds. d. typically have a lower rate of return and lower costs than inde2 funds. AN ! * D"#! 1 $%#! &'-1 NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! ,utual funds + "nde2 funds , *! "nterpretive 135. -hich of the following statements a/out mutual funds is correctB a. A mutual fund is a financial intermediary. /. A mutual fund ac4uires its funds primarily /y selling shares to the pu/lic. c. People who /uy shares from a mutual fund accept all of the ris. and return associated with the mutual fund<s portfolio. d. All of the a/ove are correct. AN ! D NAT! Analytic T)P! ,utual funds D"#! & $%#! &'-1 ()*! The tudy of economics, and definitions of economics , *! "nterpretive
&3:
13'. -hich advantageHsI do mutual funds claim to provideB a. diversification and access to the s.ills of professional money managers /. diversification /ut not access to the s.ills of professional money managers c. access to the s.ills of professional money managers /ut not diversification d. neither diversification nor access to the s.ills of professional money managers. AN ! A NAT! Analytic T)P! ,utual funds D"#! 1 $%#! &'-1 ()*! The study of economics, and definitions of economics , *! "nterpretive
Sec$2 % Saving, Investment, and the Financial System % Saving and Investment in the "ati*nal Inc*me Acc*)nts
&ULTI'LE C !ICE 1. -hich of the following is not correctB a. Gross domestic product is /oth total income in an economy and total e2penditures on the economy<s output of goods and services. /. "n a closed economy net e2ports are @ero. c. National saving is the sum of private saving and pu/lic saving. d. Purchases of capital goods are e2cluded from GDP.
AN ! D D"#! 1 $%#! &'-& NAT! Analytic ()*! The study of economics, and definitions of economics T)P! "nvestment + Gross domestic product , *! Definitional &. Eou o/serve a closed economy that has a government deficit and positive investment. -hich of the following is correctB a. Private and pu/lic saving are /oth positive. /. Private saving is positiveO pu/lic saving is negative. c. Private saving is negativeO pu/lic saving is positive. d. 1oth private saving and pu/lic saving are negative.
AN ! 1 D"#! & $%#! &'-& NAT! Analytic ()*! The study of economics, and definitions of economics T)P! Private saving + Pu/lic saving , *! Analytic 0. "f national saving in a closed economy is greater than @ero, which of the following must /e trueB a. %ither pu/lic saving or private saving must /e greater than @ero. /. "nvestment is positive. c. E - * - G U : d. All of the a/ove are correct.
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AN ! D D"#! & $%#! &'-& NAT! Analytic ()*! The study of economics, and definitions of economics T)P! National saving , *! Analytic 3. -hich of the following is correctB a. "n the national income accounts, investment and private saving refer to the same thing. /. "n a closed economy if national saving is greater than @ero, then everyone must /e saving. c. The financial system channels funds from savers to /orrowers. d. People whose consumption e2ceeds their income are savers.
AN ! * D"#! 1 $%#! &'-& NAT! Analytic ()*! The study of economics, and definitions of economics T)P! #inancial system + aving , *! Definitional 5. A closed economy does not a. trade with other economies. /. have free mar.ets. c. allow financial intermediation. d. All of the a/ove are correct.
AN ! A D"#! 1 $%#! &'-& NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! *losed economies , *! Definitional '. The assumption of a closed economy a. applies to the world economy. /. applies to most national economies. c. re4uires us to assume that the government<s /udget is always /alanced. d. All of the a/ove are correct.
AN ! A D"#! 1 $%#! &'-& NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! *losed economies , *! "nterpretive 6. "n a closed economy, what does HT - GI representB a. national saving /. investment c. private saving d. pu/lic saving D"#! 1 $%#! &'-& ()*! The tudy of economics, and definitions of economics , *! Definitional
AN ! D NAT! Analytic T)P! Pu/lic saving 7.
"n a closed economy, what remains after paying for consumption and government purchases is a. national disposa/le income. /. national saving. c. pu/lic saving. d. private saving.
AN ! 1 D"#! & $%#! &'-& NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! National saving , *! "nterpretive 8. "n a closed economy, what does HY - T - CI representB a. national saving /. government ta2 revenue c. pu/lic saving d. private saving
AN ! D D"#! 1 $%#! &'-& NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! Private saving , *! Definitional

1:.
&3&
"n which of the following cases would it necessarily /e true that national saving and private saving are e4ual for a closed economyB a. Private saving is e4ual to government e2penditures. /. Pu/lic saving is e4ual to investment. c. After paying their ta2es and paying for their consumption, households have nothing left. d. The government<s ta2 revenue is e4ual to its e2penditures.
AN ! D D"#! & $%#! &'-& NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! National saving + Private saving , *! Applicative 11. -hich of the following statements is correctB a. The total income in the economy that remains after paying for consumption and government purchases is called "rivate saving. /. The sum of private saving and national saving is called "ublic saving. c. #or a closed economy, the sum of private saving and pu/lic saving must e4ual investment. d. #or a closed economy, the sum of consumption, national saving, and ta2es must e4ual GDP. D"#! & $%#! &'-& ()*! The tudy of economics, and definitions of economics , *! "nterpretive
AN ! * NAT! Analytic T)P! "dentities 1&.
Net e2ports must e4ual @ero for any economy a. that is closed. /. for which Y J C R # R G. c. for which S J Y - C - G. d. All of the a/ove are correct.
AN ! D D"#! & $%#! &'-& NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! *losed economies , *! Applicative 10. "n national income accounting, we use which of the following pairs of terms interchangea/lyB a. SinvestmentT and Sprivate savingT /. SinvestmentT and Spurchases of stoc.s and /ondsT c. SsavingT and Snational savingT d. Spu/lic savingT and Sgovernment ta2 revenue minus government spendingT
AN ! D D"#! 1 $%#! &'-& NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! National saving , *! Definitional 13. The purchase of a new house is the one form of a. investment that is financed /y private saving rather than pu/lic saving. /. household spending that is not counted as part of investment in the national income accounts. c. household spending that is investment rather than consumption. d. household spending that does not contri/ute to GDP. D"#! 1 $%#! &'-& ()*! The tudy of economics, and definitions of economics , *! Definitional
AN ! * NAT! Analytic T)P! "nvestment 15.
The identity that shows that total income and total e2penditure are e4ual is a. G$ J Y. /. Y J $# R T R %&. c. G$ J G% - %&. d. Y J C R # R G R %&.
AN ! D D"#! 1 $%#! &'-& NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! Gross domestic product , *! "nterpretive
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1'.

-hich of the following lists correctly identifies the four e2penditure categories of GDPB a. consumption, government purchases, investment, net-e2ports /. consumption, investment, depreciation, net-e2ports c. consumption, saving, investment, depreciation, d. consumption, government purchases, investment, savings
AN ! A D"#! 1 $%#! &'-& NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! Gross domestic product , *! Definitional 16. Y J C R # R G R %& is an identity /ecause a. each sym/ol identifies a macroeconomic varia/le. /. the right-hand and left-hand sides are e4ual when an e4uili/rium is reached. c. the e4uality holds due to the way the varia/les are defined. d. None of the a/ove is correct.
AN ! * D"#! 1 $%#! &'-& NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! "dentities + Gross domestic product , *! "nterpretive 17. -hich of the following e4uations will always represent GDP in an open economyB a. S J # - G /. # J Y - C R G c. Y J C R # R G d. Y J C R # R G R %&
AN ! D D"#! 1 $%#! &'-& NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! Gross domestic product , *! "nterpretive 18. -hich of the following e4uations represents GDP for a closed economyB a. Y J C R # R G R T /. S J # - G c. # J Y - C R G d. Y J C R # R G
AN ! D D"#! 1 $%#! &'-& NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! Gross domestic product + *losed economies , *! "nterpretive &:. -hich of the following e4uations represents GDP for an open economyB a. Y J C R # R G R %& /. %& J # - G c. # J Y - C R G R %& d. Y J C R # R G
AN ! A D"#! 1 $%#! &'-& NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! Gross domestic product + )pen economies , *! "nterpretive &1. -hich of the following e2pressions must /e e4ual to national saving for a closed economyB a. Y - # - G - %& /. Y - C - G c. Y - # - C d. G R C - Y
AN ! 1 D"#! 1 $%#! &'-& NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! National saving , *! "nterpretive &&. "n a closed economy, national saving e4uals a. investment. /. income minus the sum of consumption and government purchases. c. private saving plus pu/lic saving. d. All of the a/ove are correct.

AN ! D D"#! & $%#! &'-& NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! National saving , *! "nterpretive &0. "n a closed economy, national saving is a. usually greater than investment. /. e4ual to investment. c. usually less than investment /ecause of the lea.age of ta2es. d. always less than investment.
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AN ! 1 D"#! 1 $%#! &'-& NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! National saving , *! Definitional &3. "n a small closed economy investment is =&: /illion and private saving is =&& /illion. -hat are pu/lic saving and national savingB a. =&3 /illion and =& /illion /. =&: /illion and -=& /illion c. =& /illion and =&3 /illion d. -=& /illion and =&: /illion
AN ! D D"#! & $%#! &'-& NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! National saving + Pu/lic saving , *! Applicative &5. uppose a closed economy had pu/lic saving of =0 trillion and private saving of =& trillion. -hat are national saving and investment for this countryB a. =5 trillion, =5 trillion /. =5 trillion, =& trillion c. =1 trillion, =5 trillion d. =1 trillion, =& trillion
AN ! A D"#! & $%#! &'-& NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! National saving + "nvestment , *! Applicative &'. *onsider the e2pressions T - G and Y - T - C. -hich of the following statements is correctB a. %ach one of these is e4ual to national saving. /. %ach one of these is e4ual to pu/lic saving. c. The first of these is private savingO the second one is pu/lic saving. d. The first of these is pu/lic savingO the second one is private saving.
AN ! D D"#! 1 $%#! &'-& NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! Pu/lic saving + Private saving , *! Definitional &6. According to the definitions of private and pu/lic saving, if Y, C, and G remained the same, an increase in ta2es would a. raise /oth private and pu/lic saving. /. raise private saving and lower pu/lic saving. c. lower private saving and raise pu/lic saving. d. lower private and pu/lic saving.
AN ! * D"#! & $%#! &'-& NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! Private saving + Pu/lic saving , *! "nterpretive &7. According to the definitions of national saving and private saving, if Y, C, and G remained the same, an increase in ta2es would a. raise /oth national saving and private saving. /. raise national saving and reduce private saving. c. leave national saving and private saving unchanged. d. leave national saving unchanged and reduce private saving.
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AN ! D D"#! & $%#! &'-& NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! National saving + Private saving , *! "nterpretive &8. According to the definitions of national saving and pu/lic saving, if Y, C, and G remained the same, an increase in ta2es would a. raise national saving and pu/lic saving. /. raise national saving and raise pu/lic saving. c. leave national saving and pu/lic saving unchanged. d. leave national saving unchanged and raise pu/lic saving.
AN ! D D"#! & $%#! &'-& NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! National saving + Pu/lic saving , *! "nterpretive 0:. uppose that in a closed economy GDP is e4ual to 11,:::, ta2es are e4ual to 1,5::, consumption e4uals 6,5::, and government purchases e4ual &,:::. -hat is national savingB a. -5:: /. : c. 1,5:: d. None of the a/ove is correct.
AN ! * D"#! & $%#! &'-& NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! National saving , *! Applicative 01. uppose that in a closed economy GDP is e4ual to 11,:::, ta2es are e4ual to &,5::, consumption e4uals 6,:::, and government purchases e4ual 0,:::. -hat are private saving and pu/lic savingB a. 1,5:: and -5::, respectively /. 1,5:: and 5::, respectively c. 1,::: and -5::, respectively d. 1,::: and 5::, respectively
AN ! A D"#! & $%#! &'-& NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! Pu/lic saving + Private saving , *! Applicative 0&. uppose that in a closed economy GDP is e4ual to 11,:::, ta2es are e4ual to &,5:: consumption e4uals 6,5:: and government purchases e4ual &,:::. -hat are private saving, pu/lic saving, and national savingB a. 1,5::, 1,:::, and 5::, respectively /. 1,:::, 5::, and 1,5::, respectively c. 5::, 1,5::, and 1,:::, respectively d. None of the a/ove is correct.
AN ! 1 D"#! 0 $%#! &'-& NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! Private saving + Pu/lic saving + National saving , *! Applicative 00. uppose that in a closed economy GDP is 11,:::, consumption is 6,5::, and ta2es are &,:::. -hat value of government purchases would ma.e national savings e4ual to 1,::: and at that value would the government have a deficit or surplusB a. &,5::, deficit /. &,5::, surplus c. 1,:::, deficit d. 1,:::, surplus
AN ! A D"#! & $%#! &'-& NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! National saving + 1udget deficits , *! Applicative

03.
&3'
uppose the economy is closed with national saving of =& trillion, consumption of =6 trillion, and government purchases of =1 trillion. -hat is GDPB a. =7 trillion /. =8 trillion c. =1: trillion d. =11 trillion
AN ! * D"#! 1 $%#! &'-& NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! Gross domestic product , *! Applicative 05. uppose the economy is closed and consumption is ',5::, ta2es are 1,5::, and government purchases are &,:::. "f national saving amounts to 1,:::, then what is GDPB a. 8,5:: /. 1:,::: c. 1:,5:: d. None of the a/ove is correct.
AN ! A D"#! & $%#! &'-& NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! Gross domestic product , *! Applicative 0'. #or a closed economy, GDP is =11 trillion, consumption is =6 trillion, ta2es are =& trillion and the government runs a deficit of =1 trillion. -hat are private saving and national savingB a. =3 trillion and =1 trillion, respectively /. =3 trillion and =-1 trillion, respectively c. =& trillion and =1 trillion, respectively d. =& trillion and =-1 trillion, respectively
AN ! * D"#! 0 $%#! &'-& NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! Private saving + National saving , *! Applicative 06. #or a closed economy, GDP is =11 trillion, consumption is =6 trillion, ta2es are =0 trillion and the government runs a surplus of =1 trillion. -hat are private saving and national savingB a. =3 trillion and =1 trillion, respectively /. =3 trillion and =5 trillion, respectively c. =1 trillion and =& trillion, respectively d. =1 trillion and =1 trillion, respectively
AN ! * D"#! 0 $%#! &'-& NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! Private saving + National saving , *! Applicative 07. "f in a closed economy Y J =11 trillion, which of the following com/inations would /e consistent with national saving of =&.5 trillionB a. C J =7 trillion, G J =.5 trillion /. C J ='.5 trillion, G J =0 trillion c. C J =7.5 trillion, G J =& trillion d. C J =8 trillion, G J =.5 trillion
AN ! A D"#! & $%#! &'-& NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! National saving , *! "nterpretive 08. #or an imaginary closed economy, T J =5,:::O S J =11,:::O C J =5:,:::O and the government is running a /udget deficit of =1,:::. Then a. private saving J =1:,::: and GDP J =53,:::. /. private saving J =1:,::: and GDP J =57,:::. c. private saving J =1&,::: and GDP J ='6,:::. d. private saving J =1&,::: and GDP J =6&,:::.
AN ! * D"#! 0 $%#! &'-& NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! Private saving + Gross domestic product , *! Applicative
&36

GDP J =11:,:::O consumption J =6:,:::O private saving J =7,:::O national saving J =1&,:::.
Scenari* 26%(+ Ass)me the 0*ll*2ing in0*rmati*n 0*r an imaginary, cl*sed ec*n*my+
3:.
Re0er t* Scenari* 26%(+ #or this economy, investment amounts to a. =3,:::. /. =7,:::. c. =1&,:::. d. =1',:::. D"#! & $%#! &'-& ()*! The tudy of economics, and definitions of economics , *! Applicative
AN ! * NAT! Analytic T)P! "nvestment 31.
Re0er t* Scenari* 26%(+ This economy<s government is running a a. /udget surplus of =3,:::. /. /udget surplus of =7,:::. c. /udget deficit of =3,:::. d. /udget deficit of =7,:::.
AN ! A D"#! & $%#! &'-& NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! Government purchases , *! Applicative 3&. Re0er t* Scenari* 26%(+ #or this economy, government purchases amount to a. =1&,:::. /. =17,:::. c. =&7,:::. d. =3:,:::.
AN ! * D"#! & $%#! &'-& NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! Government purchases , *! Applicative 30. Re0er t* Scenari* 26%(+ #or this economy, ta2es amount to a. =1',:::. /. =&3,:::. c. =&7,:::. d. =0&,:::. D"#! & $%#! &'-& ()*! The tudy of economics, and definitions of economics , *! Applicative
AN ! D NAT! Analytic T)P! Ta2es 33.
"n the small closed economy of an (ucretia, the currency is the denar. tatistics for last year show that private saving was ': /illion denars, ta2es were 6: /illion denars, government purchases of goods and services were 7: /illion denars, there were no transfer payments /y the government, and GDP was 3:: /illion denars. -hat were consumption and investment in an (ucretiaB a. &6: /illion denars, 5: /illion denars /. &': /illion denars, ': /illion denars c. &5: /illion denars, 6: /illion denars d. None of the a/ove is correct.
AN ! A D"#! & $%#! &'-& NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! *onsumption + "nvestment , *! Analytical

35.
&37
The country of ,editor uses the merit as its currency. $ecent national income statistics showed that it had GDP of =6:: million merits, no government transfer payments, ta2es of =&1: million merits, a /udget surplus of =': /illion merits, and investment of =1:: /illion merits. -hat were its consumption and government e2penditures on goods and servicesB a. 35: million merits and =15: million merits /. 31: million merits and =15: million merits c. 00: million merits and =&6: million merits d. &8: million merits and =&6: million merits
AN ! A D"#! 0 $%#! &'-& NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! *onsumption + Government purchases , *! Analytical 3'. *onsider three different closed economies with the following national income statistics. *ountry A has ta2es of =3: /illion, transfers of =&: /illion, and government e2penditures on goods and services of =0: /illion. *ounty 1 has private savings of =': /illion, and investment e2penditures of =5: /illion. *ountry * has GDP of =0:: /illion, investment of =6:, consumption of =17: /illion, ta2es of =': /illion and transfers of =&: /illion. #rom this information we .now that there is a =1: /illion government /udget deficit for a. only country A. /. only country 1. c. only country *. d. all three countries.
AN ! D D"#! 0 $%#! &'-& NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! 1udget deficits , *! Analytical 36. "n e2amining the national income accounts of the closed economy of Nepotocracy you see that this year it had ta2es of =1:: /illion, transfers of =3: /illion, and government purchases of goods and services of =7: /illion. Eou also notice that last year it had private saving of =5: /illion and investment of =6: /illion. "n which year did Nepotocracy have a /udget deficit of =&: /illionB a. this year and last year /. this year /ut not last year c. last year /ut not this year d. neither this year nor last year
AN ! 1 D"#! 0 $%#! &'-& NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! 1udget deficits , *! Applicative 37. Eou have some estimates of national accounts num/ers for a closed economy for the coming year. 9nder one set of e2pectations, government purchases will /e =0: /illion, transfer payments will /e =1: /illion, and ta2es will /e =35 /illion. 9nder another set of e2pectations, GDP will /e =&:: /illion, ta2es will /e =5: /illion, transfer payments will /e =&: /illion, consumption will /e =1&: million, and investment will /e =3: /illion. 1ased on these num/ers in the first case there should /e a a. =15 /illion surplus, and in the second case a =1: /illion surplus. /. =15 /illion surplus, and in the second case a =1: /illion deficit. c. =5 /illion surplus, and in the second case a =1: /illion surplus. d. =5 /illion surplus, and in the second case a =1: /illion deficit.
AN ! D D"#! 0 $%#! &'-& NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! 1udget deficits + 1udget surpluses , *! Analytical 38. The country of *edarland does not trade with any other country. "ts GDP is =&: /illion. "ts government purchases =0 /illion worth of goods and services each year, collects =' /illion in ta2es, and provides =& /illion in transfer payments to households. Private saving in *edarland is =3 /illion. -hat is investment in *edarlandB a. =5 /illion /. =3 /illion c. =0 /illion d. =& /illion
&38

D"#! 0 $%#! &'-& ()*! The tudy of economics, and definitions of economics , *! Applicative
AN ! A NAT! Analytic T)P! "nvestment 5:.
The country of Growpaw does not trade with any other country. "ts GDP is =16 /illion. "ts government purchases =3 /illion worth of goods and services each year, collects =' /illion in ta2es, and provides =1 /illion in transfer payments to households. Private saving in Growpaw is =3 /illion. #or Growpaw, a. investment is =' /illion and consumption is =8 /illion. /. investment is =' /illion and consumption is =7 /illion. c. investment is =5 /illion and consumption is =7 /illion. d. investment is =5 /illion and consumption is =6 /illion.
AN ! * D"#! 0 $%#! &'-& NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! "nvestment + *onsumption , *! Applicative 51. The country of >y.enia does not trade with any other country. "ts GDP is =&: /illion. "ts government collects =3 /illion in ta2es and pays out =0 /illion to households in the form of transfer payments. *onsumption e4uals =15 /illion and investment e4uals =& /illion. -hat is pu/lic saving in >y.enia, and what is the value of the goods and services purchased /y the government of >y.eniaB a. -=& /illion and =0 /illion /. =1 /illion and =0 /illion c. -=1 /illion and =3 /illion d. There is not enough information to answer the 4uestion.
AN ! A D"#! 0 $%#! &'-& NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! Pu/lic saving + Government purchases , *! Analytical 5&. The country of Eo.ovia does not trade with any other country. "ts GDP is =0: /illion. "ts government purchases =5 /illion worth of goods and services each year, collects =6 /illion in ta2es, and provides =0 /illion in transfer payments to households. Private saving in Eo.ovia amounts to =5 /illion. -hat are consumption and investment in Eo.oviaB a. =17 /illion and =5 /illion, respectively /. =&1 /illion and =3 /illion, respectively c. =10 /illion and =6 /illion, respectively d. There is not enough information to answer the 4uestion.
AN ! 1 D"#! 0 $%#! &'-& NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! *onsumption + "nvestment , *! Analytical 50. "n a closed economy, private saving is a. the amount of income that households have left after paying for their ta2es and consumption. /. the amount of income that /usinesses have left after paying for the factors of production. c. the amount of ta2 revenue that the government has left after paying for its spending. d. always e4ual to investment.
AN ! A D"#! 1 $%#! &'-& NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! Private saving , *! Definitional 53. "n a closed economy, pu/lic saving is the a. amount of income that households have left after paying for ta2es and consumption. /. amount of income that /usinesses have left after paying for the factors of production. c. amount of ta2 revenue that the government has left after paying for its spending. d. sum of A, 1, and *. D"#! 1 $%#! &'-& ()*! The tudy of economics, and definitions of economics , *! Definitional
AN ! * NAT! Analytic T)P! Pu/lic saving

55. -hich of the following is not always correct for a closed economyB a. National saving e4uals private saving plus pu/lic saving. /. Net e2ports e4ual @ero. c. $eal GDP measures /oth income and e2penditures. d. Private saving e4uals investment.
&5:
AN ! D D"#! 1 $%#! &'-& NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! *losed economies , *! "nterpretive 5'. "f the ta2 revenue of the federal government e2ceeds spending, then the government necessarily a. runs a /udget deficit. /. runs a /udget surplus. c. runs a national de/t. d. will increase ta2es.
AN ! 1 D"#! 1 $%#! &'-& NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! 1udget deficits , *! "nterpretive 56. A /udget surplus is created if a. the government sells more /onds than it /uys /ac.. /. the government spends more than it receives in ta2 revenue. c. private saving is greater than @ero. d. None of the a/ove is correct.
AN ! D D"#! 1 $%#! &'-& NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! 1udget surpluses , *! Definitional 57. "n the language of macroeconomics, investment refers to a. saving. /. the purchase of new capital. c. the purchase of stoc.s, /onds, or mutual funds. d. All of the a/ove are correct. D"#! 1 $%#! &'-& ()*! The tudy of economics, and definitions of economics , *! Definitional
AN ! 1 NAT! Analytic T)P! "nvestment 58.
(arry /uys stoc. in A to N %2press *ompany. *urly *orporation /uilds a new factory. -hose transaction would /e an act of investment in the language of macroeconomicsB a. only (arry<s /. only *urly *orporation<s c. (arry<s and *urly *orporation<s d. neither (arry<s nor *urly *orporation<s D"#! 1 $%#! &'-& ()*! The tudy of economics, and definitions of economics , *! "nterpretive
AN ! 1 NAT! Analytic T)P! "nvestment ':.
-hich of the following would /e included as investment in the GDP accountsB a. the government /uys goods from another country /. someone /uys stoc. in an American company c. a firm increases its capital stoc. d. All of the a/ove are correct. D"#! & $%#! &'-& ()*! The tudy of economics, and definitions of economics , *! "nterpretive
AN ! * NAT! Analytic T)P! "nvestment
&51
'1.

-hich of the following would a macroeconomist consider as investmentB a. *harlie purchases a /ond issued /y Proctor and Gam/le *orp. /. Karlee purchases stoc. issued /y Te2as "nstruments, "nc. c. ,ariah /uilds a new coffee shop. d. All of the a/ove are correct. D"#! 1 $%#! &'-& ()*! The tudy of economics, and definitions of economics , *! "nterpretive
AN ! * NAT! Analytic T)P! "nvestment '&.
#ran /uys 1,::: shares of stoc. issued /y ,iller 1rewing. "n turn, ,iller uses the funds to /uy new machinery for one of its /reweries. a. #ran and ,iller are /oth investing. /. #ran and ,iller are /oth saving. c. #ran is investingO ,iller is saving. d. #ran is savingO ,iller is investing. D"#! & $%#! &'-& ()*! The tudy of economics, and definitions of economics , *! "nterpretive
AN ! D NAT! Analytic T)P! "nvestment
Sec$3 % Saving, Investment, and the Financial System % The &ar,et 0*r L*ana1le F)nds
&ULTI'LE C !ICE 1. The source of the supply of loana/le funds a. is saving and the source of demand for loana/le funds is investment. /. is investment and the source of demand for loana/le funds is saving. c. and the demand for loana/le funds is saving. d. and the demand for loana/le funds is investment.
AN ! A D"#! 1 $%#! &'-0 NAT! Analytic ()*! 9nderstanding and Applying %conomic ,odels T)P! ,ar.et for loana/le funds , *! Definitional &. Assuming the mar.et for loana/le funds is in e4uili/rium, use the following num/ers to determine the 4uantity of loana/le funds supplied. GDP *onsumption pending Ta2es Net of Transfers Government Purchases =7.6 trillion =0.5 trillion =&.6 trillion =0.: trillion
a. /. c. d.
=&.& trillion =&.5 trillion =0.8 trillion =5.& trillion
AN ! A D"#! & $%#! &'-0 NAT! Analytic ()*! 9nderstanding and Applying %conomic ,odels T)P! ,ar.et for loana/le funds , *! Applicative 0. uppose the mar.et for loana/le funds is in e4uili/rium. Given the num/ers /elow, determine the 4uantity of loana/le funds demanded. GDP *onsumption Ta2es Net of Transfers Government pending =1:: /illion ='5 /illion =15 /illion =&: /illion

a. /. c. d. =&5 /illion =&: /illion =15 /illion =1: /illion
&5&
AN ! * D"#! & $%#! &'-0 NAT! Analytic ()*! 9nderstanding and Applying %conomic ,odels T)P! ,ar.et for loana/le funds , *! Applicative 3. The slope of the demand for loana/le funds curve represents the a. positive relation /etween the real interest rate and investment. /. negative relation /etween the real interest rate and investment. c. positive relation /etween the real interest rate and saving. d. negative relation /etween the real interest rate and saving.
AN ! 1 D"#! & $%#! &'-0 NAT! Analytic ()*! 9nderstanding and Applying %conomic ,odels T)P! ,ar.et for loana/le funds , *! "nterpretive 5. The %ye of >orus incense company has =1: million in cash which it has accumulated from retained earnings. "t was planning to use the money to /uild a new factory. $ecently, the rate of interest has increased. The increase in the rate of interest should a. not influence the decision to /uild the factory /ecause The %ye of >orus doesnAt have to /orrow any money. /. not influence the decision to /uild the factory /ecause its stoc.holders are e2pecting a new factory. c. ma.e it more li.ely that The %ye of >orus will /uild the factory /ecause a higher interest rate will ma.e the factory more valua/le. d. ma.e it less li.ely that The %ye of >orus will /uild the factory /ecause the opportunity cost of the =1: million is now higher.
AN ! D D"#! 0 $%#! &'-0 NAT! Analytic ()*! 9nderstanding and Applying %conomic ,odels T)P! "nvestment + ,ar.et for loana/le funds , *! Applicative '. )ther things the same, when the interest rate rises, a. people would want to lend more, ma.ing the supply of loana/le funds increase. /. people would want to lend less, ma.ing the supply of loana/le funds decrease. c. people would want to lend more, ma.ing the 4uantity of loana/le funds supplied increase. d. people would want to lend less, ma.ing the 4uantity of loana/le funds supplied decrease.
AN ! * D"#! & $%#! &'-0 NAT! Analytic ()*! 9nderstanding and Applying %conomic ,odels T)P! ,ar.et for loana/le funds , *! "nterpretive 6. #red is considering e2panding his dress shop. "f interest rates rise he is a. less li.ely to e2pand. This illustrates why the supply of loana/le funds slopes downward. /. more li.ely to e2pand. This illustrates why the supply of loana/le funds slopes upward. c. less li.ely to e2pand. This illustrates why the demand for loana/le funds slopes downward. d. more li.ely to e2pand. This illustrates why the demand for loana/le funds slopes upward.
AN ! * D"#! & $%#! &'-0 NAT! Analytic ()*! 9nderstanding and Applying %conomic ,odels T)P! "nvestment + ,ar.et for loana/le funds , *! "nterpretive 7. The slope of the supply of loana/le funds curve represents the a. positive relation /etween the real interest rate and investment. /. positive relation /etween the real interest rate and saving. c. negative relation /etween the real interest rate and investment. d. negative relation /etween the real interest rate and saving.
AN ! 1 D"#! & $%#! &'-0 NAT! Analytic ()*! 9nderstanding and Applying %conomic ,odels T)P! ,ar.et for loana/le funds , *! "nterpretive
&50
8.

)ther things the same, a higher interest rate induces people to a. save more, so the supply of loana/le funds slopes upward. /. save less, so the supply of loana/le funds slopes downward. c. invest more, so the supply of loana/le funds slopes upward. d. invest less, so the supply of loana/le funds slopes downward.
AN ! A D"#! 1 $%#! &'-0 NAT! Analytic ()*! 9nderstanding and Applying %conomic ,odels T)P! ,ar.et for loana/le funds , *! "nterpretive 1:. The supply of loana/le funds slopes a. upward /ecause an increase in the interest rate induces people to save more. /. downward /ecause an increase in the interest rate induces people to save less. c. downward /ecause an increase in the interest rate induces people to invest less. d. upward /ecause an increase in the interest rate induces people to invest more.
AN ! A D"#! 1 $%#! &'-0 NAT! Analytic ()*! 9nderstanding and Applying %conomic ,odels T)P! ,ar.et for loana/le funds , *! "nterpretive 11. )ther things the same, an increase in the interest rate a. would shift the demand for loana/le funds to the right. /. would shift the demand for loana/le funds to the left. c. would increase the 4uantity of loana/le funds demanded. d. would decrease the 4uantity of loana/le funds demanded.
AN ! D D"#! & $%#! &'-0 NAT! Analytic ()*! 9nderstanding and Applying %conomic ,odels T)P! ,ar.et for loana/le funds , *! "nterpretive 1&. "f the 4uantity of loana/le funds demanded e2ceeds the 4uantity of loana/le funds supplied, a. there is a surplus and the interest rate is a/ove the e4uili/rium level. /. there is a surplus and the interest rate is /elow the e4uili/rium level. c. there is a shortage and the interest rate is a/ove the e4uili/rium level. d. there is a shortage and the interest rate is /elow the e4uili/rium level.
AN ! D D"#! & $%#! &'-0 NAT! Analytic ()*! 9nderstanding and Applying %conomic ,odels T)P! ,ar.et for loana/le funds , *! "nterpretive 10. "f the 4uantity of loana/le funds supplied e2ceeds the 4uantity of loana/le funds demanded, a. there is a surplus and the interest rate is a/ove the e4uili/rium level. /. there is a surplus and the interest rate is /elow the e4uili/rium level. c. there is a shortage and the interest rate is a/ove the e4uili/rium level. d. there is a shortage and the interest rate is /elow the e4uili/rium level.
AN ! A D"#! & $%#! &'-0 NAT! Analytic ()*! 9nderstanding and Applying %conomic ,odels T)P! ,ar.et for loana/le funds , *! "nterpretive 13. "f there is a surplus of loana/le funds, then a. the 4uantity of loana/le funds demanded is greater than the 4uantity of loana/le funds supplied and the interest rate is a/ove e4uili/rium. /. the 4uantity of loana/le funds demanded is greater than the 4uantity of loana/le funds supplied and the interest rate is /elow e4uili/rium. c. the 4uantity of loana/le funds supplied is greater than the 4uantity of loana/le funds demanded and the interest rate is a/ove e4uili/rium. d. the 4uantity of loana/le funds supplied is greater than the 4uantity of loana/le funds demanded and the interest rate is /elow e4uili/rium.
AN ! * D"#! & $%#! &'-0 NAT! Analytic ()*! 9nderstanding and Applying %conomic ,odels T)P! ,ar.et for loana/le funds , *! "nterpretive

15. "f there is a shortage of loana/le funds, then a. the 4uantity of loana/le funds demanded is greater than the 4uantity of loana/le funds supplied and the interest rate is a/ove e4uili/rium. /. the 4uantity of loana/le funds demanded is greater than the 4uantity of loana/le funds supplied and the interest rate is /elow e4uili/rium. c. the 4uantity of loana/le funds supplied is greater than the 4uantity of loana/le funds demanded and the interest rate is a/ove e4uili/rium. d. the 4uantity of loana/le funds supplied is greater than the 4uantity of loana/le funds demanded and the interest rate is /elow e4uili/rium.
&53
AN ! 1 D"#! & $%#! &'-0 NAT! Analytic ()*! 9nderstanding and Applying %conomic ,odels T)P! ,ar.et for loana/le funds , *! "nterpretive 1'. "f there is a surplus of loana/le funds, then a. the 4uantity demanded is greater than the 4uantity supplied and the interest rate will rise. /. the 4uantity demanded is greater than the 4uantity supplied and the interest rate will fall. c. the 4uantity supplied is greater than the 4uantity demanded and the interest rate will rise. d. the 4uantity supplied is greater than the 4uantity demanded and the interest rate will fall.
AN ! D D"#! & $%#! &'-0 NAT! Analytic ()*! 9nderstanding and Applying %conomic ,odels T)P! ,ar.et for loana/le funds , *! "nterpretive 16. "f there is a shortage of loana/le funds, then a. the 4uantity demanded is greater than the 4uantity supplied and the interest rate will rise. /. the 4uantity demanded is greater than the 4uantity supplied and the interest rate will fall. c. the 4uantity supplied is greater than the 4uantity demanded and the interest rate will rise. d. the 4uantity supplied is greater than the 4uantity demanded and the interest rate will fall.
AN ! A D"#! & $%#! &'-0 NAT! Analytic ()*! 9nderstanding and Applying %conomic ,odels T)P! ,ar.et for loana/le funds , *! "nterpretive 17. "f there is shortage of loana/le funds, then a. the supply for loana/le funds shifts right and the demand shifts left. /. the supply for loana/le funds shifts left and the demand shifts right. c. neither curve shifts, /ut the 4uantity of loana/le funds supplied increases and the 4uantity demanded decreases as the interest rate rises to e4uili/rium. d. neither curve shifts, /ut the 4uantity of loana/le funds supplied decreases and the 4uantity demanded increases as the interest rate falls to e4uili/rium.
AN ! * D"#! 0 $%#! &'-0 NAT! Analytic ()*! 9nderstanding and Applying %conomic ,odels T)P! ,ar.et for loana/le funds , *! "nterpretive 18. "f there is surplus of loana/le funds, then a. the supply for loana/le funds shifts right and the demand shifts left. /. the supply for loana/le funds shifts left and the demand shifts right. c. neither curve shifts, /ut the 4uantity of loana/le funds supplied increases and the 4uantity demanded decreases as the interest rate rises to e4uili/rium. d. neither curve shifts, /ut the 4uantity of loana/le funds supplied decreases and the 4uantity demanded increases as the interest rate falls to e4uili/rium.
AN ! D D"#! 0 $%#! &'-0 NAT! Analytic ()*! 9nderstanding and Applying %conomic ,odels T)P! ,ar.et for loana/le funds , *! "nterpretive &:. "f the demand for loana/le funds shifts to the right, then the e4uili/rium interest rate a. and 4uantity of loana/le funds rise. /. and 4uantity of loana/le funds fall. c. rises and the 4uantity of loana/le funds falls. d. falls and the 4uantity of loana/le funds rises.
&55
AN ! A D"#! 1 $%#! &'-0 NAT! Analytic ()*! 9nderstanding and Applying %conomic ,odels T)P! ,ar.et for loana/le funds , *! "nterpretive &1. "f the demand for loana/le funds shifts to the left, then the e4uili/rium interest rate a. and 4uantity of loana/le funds rise. /. and 4uantity of loana/le funds fall. c. rises and the 4uantity of loana/le funds falls. d. falls and the 4uantity of loana/le funds rises.
AN ! 1 D"#! 1 $%#! &'-0 NAT! Analytic ()*! 9nderstanding and Applying %conomic ,odels T)P! ,ar.et for loana/le funds , *! "nterpretive &&. "f the supply for loana/le funds shifts to the left, then the e4uili/rium interest rate a. and 4uantity of loana/le funds rise. /. and 4uantity of loana/le funds fall. c. rises and the 4uantity of loana/le funds falls. d. falls and the 4uantity of loana/le funds rises.
AN ! * D"#! 1 $%#! &'-0 NAT! Analytic ()*! 9nderstanding and Applying %conomic ,odels T)P! ,ar.et for loana/le funds , *! "nterpretive &0. "f the supply of loana/le funds shifts to the right, then the e4uili/rium interest rate a. and 4uantity of loana/le funds rise. /. and 4uantity of loana/le funds fall. c. rises and the 4uantity of loana/le funds falls. d. falls and the 4uantity of loana/le funds rises.
AN ! D D"#! 1 $%#! &'-0 NAT! Analytic ()*! 9nderstanding and Applying %conomic ,odels T)P! ,ar.et for loana/le funds , *! "nterpretive &3. -hich of the following could e2plain an increase in the interest rate and the e4uili/rium 4uantity of loana/le fundsB a. The demand for loana/le funds shifted rightward. /. The demand for loana/le funds shifted leftward. c. The supply of loana/le funds shifted rightward. d. The supply of loana/le funds shifted leftward.
AN ! A D"#! & $%#! &'-0 NAT! Analytic ()*! 9nderstanding and Applying %conomic ,odels T)P! ,ar.et for loana/le funds , *! "nterpretive &5. -hich of the following would necessarily create a surplus at the original e4uili/rium interest rate in the loana/le funds mar.etB a. an increase in the supply of or a decrease in the demand for loana/le funds /. an increase in the supply of or an increase in the demand for loana/le funds c. a decrease in the supply of or a decrease in the demand for loana/le funds d. a decrease in the supply of or an increase in the demand for loana/le funds
AN ! A D"#! & $%#! &'-0 NAT! Analytic ()*! 9nderstanding and Applying %conomic ,odels T)P! ,ar.et for loana/le funds , *! "nterpretive &'. -hich of the following could e2plain a decrease in the e4uili/rium interest rate and in the e4uili/rium 4uantity of loana/le fundsB a. The demand for loana/le funds shifted rightward. /. The demand for loana/le funds shifted leftward. c. The supply of loana/le funds shifted rightward. d. The supply of loana/le funds shifted leftward.

AN ! 1 D"#! & $%#! &'-0 NAT! Analytic ()*! 9nderstanding and Applying %conomic ,odels T)P! ,ar.et for loana/le funds , *! "nterpretive &6. -hich of the following could e2plain a decrease in the e4uili/rium interest rate and an increase in the e4uili/rium 4uantity of loana/le fundsB a. The demand for loana/le funds shifted rightward. /. The demand for loana/le funds shifted leftward. c. The supply of loana/le funds shifted rightward. d. The supply of loana/le funds shifted leftward.
&5'
AN ! * D"#! 1 $%#! &'-0 NAT! Analytic ()*! 9nderstanding and Applying %conomic ,odels T)P! ,ar.et for loana/le funds , *! "nterpretive &7. -hich of the following could e2plain an increase in the e4uili/rium interest rate and a decrease in the e4uili/rium 4uantity of loana/le fundsB a. The demand for loana/le funds shifted right. /. The demand for loana/le funds shifted left. c. The supply of loana/le funds shifted right. d. The supply of loana/le funds shifted left.
AN ! D D"#! 1 $%#! &'-0 NAT! Analytic ()*! 9nderstanding and Applying %conomic ,odels T)P! ,ar.et for loana/le funds , *! "nterpretive &8. -hich of the following would necessarily increase the e4uili/rium interest rateB a. The demand for and the supply of loana/le funds shift right. /. The demand for and the supply of loana/le funds shift left. c. The demand for loana/le funds shifts right and the supply of loana/le funds shifts left. d. The demand for loana/le funds shifts left and the supply of loana/le funds shifts right.
AN ! * D"#! & $%#! &'-0 NAT! Analytic ()*! 9nderstanding and Applying %conomic ,odels T)P! ,ar.et for loana/le funds , *! "nterpretive 0:. "n &::& mortgage rates fell and mortgage lending increased. -hich of the following could e2plain /oth of these changesB a. The demand for loana/le funds shifted right. /. The demand for loana/le funds shifted left. c. The supply of loana/le funds shifted right. d. The supply of loana/le funds shifted left.
AN ! * D"#! & $%#! &'-0 NAT! Analytic ()*! 9nderstanding and Applying %conomic ,odels T)P! ,ar.et for loana/le funds , *! Applicative 01. The nominal interest rate is the a. interest rate corrected for inflation. /. interest rate as usually reported /y /an.s. c. real rate of return to the lender. d. real cost of /orrowing to the /orrower.
AN ! 1 D"#! 1 $%#! &'-0 NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! Nominal interest rate , *! Definitional 0&. "f the nominal interest rate is 5 percent and the rate of inflation is & percent, then the real interest rate is a. 6 percent. /. 0 percent. c. &.5 percent. d. .3 percent.
&56
AN ! 1 D"#! 1 $%#! &'-0 NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! Nominal interest rate + $eal interest rate , *! Definitional 00. "f the inflation rate is & percent and the real interest rate is 0 percent, then the nominal interest rate is a. 5 percent. /. 1 percent. c. 1.5 percent d. :.'6 percent.
AN ! A D"#! 1 $%#! &'-0 NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! Nominal interest rate + $eal interest rate , *! Definitional 03. "f the nominal interest rate is 1: percent and the inflation rate is 3 percent, then the real interest rate is a. 13 percent. /. ' percent. c. &.5 percent. d. .3 percent.
AN ! 1 D"#! 1 $%#! &'-0 NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! Nominal interest rate + $eal interest rate , *! Definitional 05. "f the nominal interest rate is ' percent and the real interest rate is & percent, then what is the inflation rateB a. 7 percent /. 3 percent c. 0 percent d. None of the a/ove is correct.
AN ! 1 D"#! 1 $%#! &'-0 NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! Nominal interest rate + $eal interest rate , *! Definitional 0'. -hich of the following statements is correctB a. As a group, economists see no purpose in distinguishing /etween the nominal interest rate and the real interest rate. /. The interest rate that is usually reported is the nominal interest rate. c. "f the nominal interest rate increases and the inflation rate remains unchanged, then the real interest rate decreases. d. All of the a/ove are correct.
AN ! 1 D"#! & $%#! &'-0 NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! Nominal interest rate + $eal interest rate , *! "nterpretive 06. -hich of the following statements is correctB a. The interest rate that is usually reported is the interest rate that has /een corrected for inflation. /. The supply of, and demand for, loana/le funds depend on the real Hrather than nominalI interest rate. c. "f the nominal interest rate has decreased and the real interest rate has also decreased, then the inflation rate must have decreased as well. d. All of the a/ove are correct.
AN ! 1 D"#! & $%#! &'-0 NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! Nominal interest rate + $eal interest rate , *! "nterpretive

07.
&57
uppose the mar.et for loana/le funds is in e4uili/rium. -hat would happen in the mar.et for loana/le funds, other things the same, if the *ongress and President increased the ma2imum contri/ution limits to 3:1H.I and 3:0H/I ta2-deferred retirement accountsB a. the interest rate and 4uantity of loana/le funds would increase /. the interest rate and 4uantity of loana/le funds would decrease. c. the interest rate would increase and the 4uantity of loana/le funds would decrease. d. the interest rate would decrease and the 4uantity of loana/le funds would increase. D"#! & $%#! &'-0 ()*! 9nderstanding and Applying %conomic ,odels , *! Analytical
AN ! D NAT! Analytic T)P! aving 08.
-hat would happen in the mar.et for loana/le funds if the government were to increase the ta2 on interest incomeB a. "nterest rates would rise. /. "nterest rates would /e unaffected. c. "nterest rates would fall. d. The effect on the interest rate is uncertain.
AN ! A D"#! & $%#! &'-0 NAT! Analytic ()*! 9nderstanding and Applying %conomic ,odels T)P! aving + ,ar.et for loana/le funds , *! Applicative 3:. -hat would happen in the mar.et for loana/le funds if the government were to decrease the ta2 rate on interest incomeB a. There would /e an increase in the amount of loana/le funds /orrowed. /. There would /e a reduction in the amount of loana/le funds /orrowed. c. There would /e no change in the amount of loana/le funds /orrowed. d. The change in loana/le funds is uncertain.
AN ! A D"#! & $%#! &'-0 NAT! Analytic ()*! 9nderstanding and Applying %conomic ,odels T)P! aving + ,ar.et for loana/le funds , *! Applicative 31. "f *ongress reduced the ta2 rate on interest income, investment a. would increase and saving would decrease. /. would decrease and saving would increase. c. and saving would increase. d. and saving would decrease.
AN ! * D"#! & $%#! &'-0 NAT! Analytic ()*! 9nderstanding and Applying %conomic ,odels T)P! aving + "nvestment + ,ar.et for loana/le funds , *! Analytical 3&. "f the government institutes policies that increase incentives to save, then in the loana/le funds mar.et a. the demand for loana/le funds shifts right. /. the demand for loana/le funds shifts left. c. the supply of loana/le funds shifts right. d. the supply of loana/le funds shifts left.
AN ! * D"#! & $%#! &'-0 NAT! Analytic ()*! 9nderstanding and Applying %conomic ,odels T)P! aving + ,ar.et for loana/le funds , *! Analytical 30. "f a reform of the ta2 laws encourages greater saving, the result would /e a. higher interest rates and greater investment. /. higher interest rates and less investment. c. lower interest rates and greater investment. d. lower interest rate and less investment.
AN ! * D"#! & $%#! &'-0 NAT! Analytic ()*! 9nderstanding and Applying %conomic ,odels T)P! aving + "nvestment + "nterest rates , *! Analytical
&58
33.

-hat would happen in the mar.et for loana/le funds if the government were to increase the ta2 on interest incomeB a. The supply of loana/le funds would shift right. /. The demand for loana/le funds would shift right. c. The supply of loana/le funds would shift left. d. The demand for loana/le funds would shift left.
AN ! * D"#! & $%#! &'-0 NAT! Analytic ()*! 9nderstanding and Applying %conomic ,odels T)P! ,ar.et for loana/le funds , *! Applicative 35. -hat would happen in the mar.et for loana/le funds if the government were to decrease the ta2 rate on interest incomeB a. The supply of and demand for loana/le funds would shift right. /. The supply of and demand for loana/le funds would shift left. c. The supply of loana/le funds would shift right and the demand for loana/le funds would shift left. d. None of the a/ove is correct.
AN ! D D"#! & $%#! &'-0 NAT! Analytic ()*! 9nderstanding and Applying %conomic ,odels T)P! Ta2es + ,ar.et for loana/le funds , *! Applicative 3'. -hat would happen in the mar.et for loana/le funds if the government were to decrease the ta2 rate on interest incomeB a. The supply of loana/le funds would shift rightward and investment would increase. /. The supply of loana/le funds would shift leftward and investment would decrease. c. The demand for loana/le funds would shift rightward and investment would increase. d. The demand for loana/le funds would shift leftward and investment would decrease.
AN ! A D"#! & $%#! &'-0 NAT! Analytic ()*! 9nderstanding and Applying %conomic ,odels T)P! Ta2es + ,ar.et for loana/le funds , *! Analytical 36. uppose the government were to replace the income ta2 with a consumption ta2 so that interest on savings was not ta2ed. The result would /e that the interest rate a. and investment /oth would increase. /. and investment /oth would decrease. c. would increase and investment would decrease. d. would decrease and investment would increase.
AN ! D D"#! 0 $%#! &'-0 NAT! Analytic ()*! 9nderstanding and Applying %conomic ,odels T)P! Ta2es + "nterest rates + "nvestment , *! Analytical 37. -hich of the following would not /e a result of replacing the income ta2 with a consumption ta2 so that interest income was no longer ta2edB a. The interest rate would decrease. /. "nvestment would decrease. c. The standard of living would eventually rise. d. The supply of loana/le funds would shift right.
AN ! 1 D"#! & $%#! &'-0 NAT! Analytic ()*! 9nderstanding and Applying %conomic ,odels T)P! Ta2es + "nterest rates + "nvestment , *! Analytical 38. "f in the past *ongress had ta.en additional actions to ma.e saving more rewarding, then today it is li.ely that the e4uili/rium interest rate a. and the e4uili/rium 4uantity of loana/le funds /oth would /e lower. /. and the e4uili/rium 4uantity of loana/le funds /oth would /e higher. c. would /e higher and the e4uili/rium 4uantity of loana/le funds would /e lower. d. would /e lower and the e4uili/rium 4uantity of loana/le funds would /e higher.
AN ! D D"#! & $%#! &'-0 NAT! Analytic ()*! 9nderstanding and Applying %conomic ,odels T)P! aving + ,ar.et for loana/le funds , *! Applicative

5:.
&':
uppose a country has a consumption ta2 that is similar to a state sales ta2. "f its government were to eliminate the consumption ta2 and replace it with an income ta2 that includes an income ta2 on interest from savings, what would happenB a. There would /e no change in the interest rate or saving. /. The interest rate would decrease and saving would increase. c. The interest rate would increase and saving would decrease. d. None of the a/ove is correct.
AN ! * D"#! 0 $%#! &'-0 NAT! Analytic ()*! 9nderstanding and Applying %conomic ,odels T)P! aving + "nterest rates , *! Analytical 51. uppose a country has only a sales ta2. Now suppose it replaces the sales ta2 with an income ta2 that includes a ta2 on interest income. This would ma.e e4uili/rium a. interest rates and the e4uili/rium 4uantity of loana/le funds rise. /. interest rates rise and the e4uili/rium 4uantity of loana/le funds fall. c. interest rates fall and the e4uili/rium 4uantity of loana/le funds rise. d. interest rates and the e4uili/rium 4uantity of loana/le funds fall.
AN ! 1 D"#! 0 $%#! &'-0 NAT! Analytic ()*! 9nderstanding and Applying %conomic ,odels T)P! Ta2es + ,ar.et for loana/le funds , *! Analytical 5&. uppose a government that ta2ed all interest income changed its ta2 law so that the first =5,::: of a ta2payer<s interest income was ta2 free. This would shift the a. supply of loana/le funds to the right, causing interest rates to fall. /. supply of loana/le funds to the left, causing interest rates to rise. c. demand for loana/le funds to the right, causing interest rates to rise. d. demand for loana/le funds to the left, causing interest rates to fall.
AN ! A D"#! & $%#! &'-0 NAT! Analytic ()*! 9nderstanding and Applying %conomic ,odels T)P! Ta2es + "nterest rates + ,ar.et for loana/le funds , *! Applicative 50. -hich of the following is not correctB a. American families save a larger fraction of their incomes than their counterparts in many other countries such as Germany and ?apan. /. aving is an important long-run determinant of a nationAs standard of living. c. A change in ta2 laws that encouraged greater saving would lower interest rates. d. Ta2es on interest income can su/stantially decrease the future value of current saving. D"#! 1 $%#! &'-0 ()*! 9nderstanding and Applying %conomic ,odels , *! "nterpretive
AN ! A NAT! Analytic T)P! aving 53.
"f *ongress instituted an investment ta2 credit, the interest rate would a. rise and saving would rise. /. fall and saving would fall. c. rise and saving would fall. d. fall and saving would rise.
AN ! A D"#! & $%#! &'-0 NAT! Analytic ()*! 9nderstanding and Applying %conomic ,odels T)P! "nvestment ta2 credit + "nterest rates + aving , *! Analytical 55. "f *ongress instituted an investment ta2 credit, the e4uili/rium 4uantity of loana/le funds would a. rise. /. fall. c. /e unchanged. d. move in an uncertain direction.
AN ! A D"#! 1 $%#! &'-0 NAT! Analytic ()*! 9nderstanding and Applying %conomic ,odels T)P! "nvestment ta2 credit + ,ar.et for loana/le funds, *! Applicative
&'1
5'.

uppose the 9. . offered a ta2 credit for firms that /uilt new factories in the 9. .. Then a. the demand for loana/le funds would shift rightward, initially creating a surplus of loana/le funds at the original interest rate. /. the demand for loana/le funds would shift rightward, initially creating a shortage of loana/le funds at the original interest rate. c. the supply of loana/le funds would shift rightward, initially creating a surplus of loana/le funds at the original interest rate. d. the supply of loana/le funds would shift rightward, initially creating a shortage of loana/le funds at the original interest rate.
AN ! 1 D"#! & $%#! &'-0 NAT! Analytic ()*! 9nderstanding and Applying %conomic ,odels T)P! "nvestment ta2 credit + ,ar.et for loana/le funds, *! Applicative 56. uppose that *ongress were to institute an investment ta2 credit. -hat would happen in the mar.et for loana/le fundsB a. The demand for loana/le funds would shift left. /. The supply of loana/le funds would shift left. c. The demand for loana/le funds would shift right. d. The supply of loana/le funds would shift right.
AN ! * D"#! 1 $%#! &'-0 NAT! Analytic ()*! 9nderstanding and Applying %conomic ,odels T)P! "nvestment ta2 credit + ,ar.et for loana/le funds, *! Applicative 57. uppose that *ongress were to re"eal an investment ta2 credit. -hat would happen in the mar.et for loana/le fundsB a. The demand and supply of loana/le funds would shift right. /. The demand and supply of loana/le funds would shift left. c. The supply of loana/le funds would shift right. d. The demand for loana/le funds would shift left.
AN ! D D"#! 1 $%#! &'-0 NAT! Analytic ()*! 9nderstanding and Applying %conomic ,odels T)P! "nvestment ta2 credit + ,ar.et for loana/le funds, *! Applicative 58. uppose a country repealed its investment ta2 credit. The effects of this are represented /y shifting the a. demand for and the supply of loana/le funds to the right. /. demand for and the supply of loana/le funds to the left. c. supply of loana/le funds to the right and the demand for loana/le funds to the left. d. None of the a/ove is correct.
AN ! D D"#! & $%#! &'-0 NAT! Analytic ()*! 9nderstanding and Applying %conomic ,odels T)P! "nvestment ta2 credit + ,ar.et for loana/le funds, *! Applicative ':. uppose *ongress institutes an investment ta2 credit. -hat would happen in the mar.et for loana/le fundsB a. The interest rate and investment would fall. /. The interest rate and investment would rise. c. The interest rate would rise and investment would fall. d. None of the a/ove is necessarily correct.
AN ! 1 D"#! & $%#! &'-0 NAT! Analytic ()*! 9nderstanding and Applying %conomic ,odels T)P! "nvestment ta2 credit + ,ar.et for loana/le funds, *! Applicative '1. "n the loana/le funds model, an increase in an investment ta2 credit would create a a. shortage at the former e4uili/rium interest rate. This shortage would lead to a rise in the interest rate. /. shortage at the former e4uili/rium interest rate. This shortage would lead to a fall in the interest rate. c. surplus at the former e4uili/rium interest rate. This surplus would lead to a rise in the interest rate. d. surplus at the former e4uili/rium interest rate. This surplus would lead to a fall in the interest rate.

AN ! A D"#! 0 $%#! &'-0 NAT! Analytic ()*! 9nderstanding and Applying %conomic ,odels T)P! "nvestment ta2 credit + ,ar.et for loana/le funds, *! Analytical '&. "f the government currently has a /udget deficit, then a. it does not necessarily have a de/t. /. its de/t is increasing. c. government e2penditures are greater than ta2es. d. All of the a/ove are correct.
&'&
AN ! D D"#! & $%#! &'-0 NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! 1udget deficits , *! "nterpretive '0. A /udget deficit a. changes the supply of loana/le funds. /. changes the demand for loana/le funds. c. changes /oth the supply of and demand for loana/le funds. d. does not influence the supply of or the demand for loana/le funds.
AN ! A D"#! 1 $%#! &'-0 NAT! Analytic ()*! 9nderstanding and Applying %conomic ,odels T)P! 1udget deficits , *! "nterpretive '3. )ther things the same, a government /udget deficit a. reduces pu/lic saving, /ut not national saving.. /. reduces national saving, /ut not pu/lic saving. c. reduces /oth pu/lic and national saving. d. reduces neither pu/lic saving nor national saving.
AN ! * D"#! & $%#! &'-0 NAT! Analytic ()*! 9nderstanding and Applying %conomic ,odels T)P! 1udget deficits + Pu/lic saving + National saving , *! "nterpretive '5. A larger /udget surplus a. raises the interest rate and investment. /. reduces the interest rate and investment. c. raises the interest rate and reduces investment. d. reduces the interest rate and raises investment.
AN ! D D"#! 1 $%#! &'-0 NAT! Analytic ()*! 9nderstanding and Applying %conomic ,odels T)P! 1udget surpluses , *! Definitional ''. A larger /udget deficit a. raises the interest rate and investment. /. reduces the interest rate and investment. c. raises the interest rate and reduces investment. d. reduces the interest rate and raises investment.
AN ! * D"#! & $%#! &'-0 NAT! Analytic ()*! 9nderstanding and Applying %conomic ,odels T)P! 1udget surpluses , *! "nterpretive '6. "n the first part of this decade the 9. . government went from a surplus to a deficit. )ther things the same, this means the a. supply of loana/le funds shifted to the right. /. supply of loana/le funds shifted to the left. c. demand for loana/le funds shifted to the right. d. demand for loana/le funds shifted to the left.
AN ! 1 D"#! & $%#! &'-0 NAT! Analytic ()*! 9nderstanding and Applying %conomic ,odels T)P! 1udget deficits + ,ar.et for loana/le funds , *! "nterpretive
&'0
'7.

"f *anada increases its /udget deficit, it will reduce a. private saving and so shift the supply of loana/le funds left. /. investment and so shift the demand for loana/le funds left. c. pu/lic saving and so shift the supply of loana/le funds left. d. None of the a/ove is correct.
AN ! * D"#! & $%#! &'-0 NAT! Analytic ()*! 9nderstanding and Applying %conomic ,odels T)P! 1udget deficits + ,ar.et for loana/le funds , *! Applicative '8. An increase in the /udget deficit would cause a a. shortage of loana/le funds at the original interest rate, which would lead to falling interest rates. /. surplus of loana/le funds at the original interest rate, which would lead to rising interest rates. c. shortage of loana/le funds at the original interest rate, which would lead to rising interest rates. d. surplus of loana/le funds at the original interest rate, which would lead to falling interest rates.
AN ! * D"#! 0 $%#! &'-0 NAT! Analytic ()*! 9nderstanding and Applying %conomic ,odels T)P! 1udget deficits + "nterest rates , *! Analytical 6:. An increase in the /udget deficit a. ma.es investment spending fall. /. ma.es investment spending rise. c. does not affect investment spending. d. may increase, decrease, or not affect investment spending. D"#! & $%#! &'-0 ()*! 9nderstanding and Applying %conomic ,odels , *! "nterpretive
AN ! A NAT! Analytic T)P! *rowding out 61.
uppose the government deficit increases, /ut the interest rate remains the same. -hich of the following things might have happened simultaneously to .eep interest rates the sameB a. The government reduces the amount that people may put into savings accounts on which the interest is ta2 e2empt. /. 1ecause they are optimistic a/out the future of the economy, firms desire to /orrow more to purchase physical capital. c. *onsumers decide to decrease consumption and wor. more. d. All of the a/ove could e2plain why the interest rate would /e unchanged.
AN ! * D"#! 0 $%#! &'-0 NAT! Analytic ()*! 9nderstanding and Applying %conomic ,odels T)P! 1udget deficits , *! Analytical 6&. )ther things the same, if the government increases transfer payments to households, then the effect of this on the government<s /udget a. will ma.e investment rise. /. will ma.e the rate of interest rise. c. will ma.e pu/lic saving rise. d. All of the a/ove are correct.
AN ! 1 D"#! 0 $%#! &'-0 NAT! Analytic ()*! 9nderstanding and Applying %conomic ,odels T)P! 1udget deficits + "nterest rates , *! Analytical 60. uppose government e2penditures on goods and services increase, transfers are unchanged, and ta2es rise /y less than the increase in e2penditures. These changes in the government<s /udget cause a. /oth the e4uili/rium interest rate and the e4uili/rium 4uantity of loana/le funds to fall. /. /oth the e4uili/rium interest rate and the e4uili/rium 4uantity of loana/le funds to rise. c. the e4uili/rium interest rate to rise and the e4uili/rium 4uantity of loana/le funds to fall. d. the e4uili/rium interest rate to fall and the e4uili/rium 4uantity of loana/le funds to rise.
AN ! * D"#! & $%#! &'-0 NAT! Analytic ()*! 9nderstanding and Applying %conomic ,odels T)P! 1udget deficits + ,ar.et for loana/le funds , *! Analytical

63.
&'3
uppose government e2penditures on goods and services and net ta2es /oth decrease, and e2penditures fall /y more than net ta2es. The effects of these changes on the /udget deficit cause a. /oth the e4uili/rium interest rate and the e4uili/rium 4uantity of loana/le funds to fall. /. /oth the e4uili/rium interest rate and the e4uili/rium 4uantity of loana/le funds to rise. c. the e4uili/rium interest rate to rise and the e4uili/rium 4uantity of loana/le funds to fall. d. the e4uili/rium interest rate to fall and the e4uili/rium 4uantity of loana/le funds to rise. D"#! T)P! & $%#! &'-0 1udget deficits + ,ar.et for loana/le funds
AN ! D NAT! Analytic , *! Analytical 65.
1olivia had a smaller /udget deficit in &::0 than in &::&. )ther things the same, we would e2pect this reduction in the /udget deficit to have a. increased /oth interest rates and investment. /. increased interest rates and decreased investment. c. decreased interest rates and increased investment. d. decreased /oth interest rates and investment. D"#! T)P! & $%#! &'-0 1udget deficits + ,ar.et for loana/le funds
AN ! * NAT! Analytic , *! Applicative 6'.
uppose a country had a smaller increase in de/t in &::7 than it had in &::6. Then other things the same, we would e2pect a. lower interest rates and investment in &::7 than in &::6. /. lower interest rates and greater investment in &::7 than in &::6. c. higher interest rates and greater investment in &::7 than in &::6. d. higher interest rates and lower investment in &::7 than in &::6.
AN ! 1 D"#! & $%#! &'-0 NAT! Analytic ()*! 9nderstanding and Applying %conomic ,odels T)P! 1udget deficits + ,ar.et for loana/le funds , *! Analytical 66. uppose the government ran a /udget surplus in &::7 and a larger surplus in &::8. The loana/le funds model would predict that, as a result of the increase in the surplus, a. /oth the government de/t and interest rates increased /etween &::7 and &::8. /. /oth the government de/t and interest rates decreased /etween &::7 and &::8. c. the government de/t increased and interest rates decreased /etween &::7 and &::8. d. the government de/t decreased and interest rates increased /etween &::7 and &::8.
AN ! 1 D"#! 1 $%#! &'-0 NAT! Analytic ()*! 9nderstanding and Applying %conomic ,odels T)P! 1udget surpluses + ,ar.et for loana/le funds , *! "nterpretive 67. *rowding out occurs when investment declines /ecause a. a /udget deficit ma.es interest rates rise. /. a /udget deficit ma.es interest rates fall. c. a /udget surplus ma.es interest rates rise. d. a /udget surplus ma.es interest rates fall. D"#! 1 $%#! &'-0 ()*! 9nderstanding and Applying %conomic ,odels , *! Definitional
AN ! A NAT! Analytic T)P! *rowding out 68.
-hen the government runs a /udget deficit, a. interest rates are lower than they would /e if the /udget were /alanced. /. national saving is higher than it would /e if the /udget were /alanced. c. investment is lower than it would /e if the /udget were /alanced. d. All of the a/ove are correct.
AN ! * D"#! 1 $%#! &'-0 NAT! Analytic ()*! 9nderstanding and Applying %conomic ,odels T)P! 1udget deficits + *rowding out , *! "nterpretive
&'5
7:.

uppose the *ongress and president decreased the ma2imum annual contri/utions limits to retirement accounts and at the same time reduced the /udget deficit. -hat would happen to the interest rateB a. "t would decrease. /. "t would increase. c. "t would stay the same. d. "t might do any of the a/ove.
AN ! D D"#! 0 $%#! &'-0 NAT! Analytic ()*! 9nderstanding and Applying %conomic ,odels T)P! 1udget deficits + aving + "nterest rates , *! Analytical 71. -hich of the following events could e2plain a decrease in interest rates together with an increase in investmentB a. The government went from surplus to deficit. /. The government instituted an investment ta2 credit. c. The government reduced the ta2 rate on savings. d. None of the a/ove is correct.
AN ! * D"#! 0 $%#! &'-0 NAT! Analytic ()*! 9nderstanding and Applying %conomic ,odels T)P! Ta2es + aving , *! Analytical 7&. -hich of the following events could e2plain an increase in interest rates together with a decrease in investmentB a. The government /udget went from surplus to deficit. /. The government instituted an investment ta2 credit. c. The government reduced the ta2 rate on savings. d. None of the a/ove is correct.
AN ! A D"#! & $%#! &'-0 NAT! Analytic ()*! 9nderstanding and Applying %conomic ,odels T)P! 1udget surpluses + 1udget deficits , *! Analytical 70. -hich of the following events could e2plain an increase in interest rates together with an increase in investmentB a. The government runs a larger deficit. /. The government institutes an investment ta2 credit. c. The government replaces the income ta2 with a consumption ta2. d. None of the a/ove is correct. D"#! & $%#! &'-0 ()*! 9nderstanding and Applying %conomic ,odels , *! Analytical
AN ! 1 NAT! Analytic T)P! "nvestment 73.
"nterest rates fall and investment falls. -hich of the following could e2plain these changesB a. The government goes from a surplus to a deficit. /. The government repeals an investment ta2 credit. c. The government replaces a consumption ta2 with an income ta2. d. None of the a/ove is correct.
AN ! 1 D"#! & $%#! &'-0 NAT! Analytic ()*! 9nderstanding and Applying %conomic ,odels T)P! "nvestment ta2 credit , *! Analytical 75. The supply of loana/le funds would shift to the right if either a. ta2 reforms encouraged greater saving or the /udget deficit /ecame smaller. /. ta2 reforms encouraged greater saving or investment ta2 credits were increased. c. the /udget deficit /ecame larger or investment ta2 credits were increased. d. the /udget deficit /ecame larger or ta2 reforms discouraged saving.
AN ! A D"#! & $%#! &'-0 NAT! Analytic ()*! 9nderstanding and Applying %conomic ,odels T)P! Ta2es + 1udget deficits , *! Analytical

7'.
&''
A change in the ta2 laws that increases the supply of loana/le funds will have a /igger effect on investment when a. the demand for loana/le funds is more elastic and the supply of loana/le funds is more inelastic. /. the demand for loana/le funds is more inelastic and the supply of loana/le funds is more elastic. c. /oth the demand for and supply of loana/le funds are more elastic. d. /oth the demand for and supply of loana/le funds are more inelastic.
AN ! A D"#! 0 $%#! &'-0 NAT! Analytic ()*! 9nderstanding and Applying %conomic ,odels T)P! Ta2es + ,ar.et for loana/le funds , *! Analytical 76. A government /udget deficit affects the supply of loana/le funds, rather than the demand for loana/le funds, /ecause a. in our model of the loana/le funds mar.et, we define Sloana/le fundsT as the flow of resources availa/le to fund private investment. /. in our model of the loana/le funds mar.et, we define Sloana/le fundsT as the flow of resources availa/le from private saving. c. mar.ets for government de/t are fundamentally different from mar.ets for private de/t. d. of our assumption that the economy is closed.
AN ! A D"#! & $%#! &'-0 NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! 1udget deficits + ,ar.et for loana/le funds , *! "nterpretive 77. "f we were to change the interpretation of the term Sloana/le fundsT in such a way that government /udget deficits would affect the demand for loana/le funds, rather than the supply of loana/le funds, then a. crowding out would not /e a conse4uence of an increase in the /udget deficit. /. higher interest rates would not /e a conse4uence of an increase in the /udget deficit. c. an increase in the /udget deficit would cause the demand for loana/le funds to decrease. d. we would /e ma.ing only a semantic change in how we analy@e the effects of government /udget deficits.
AN ! D D"#! & $%#! &'-0 NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! 1udget deficits + ,ar.et for loana/le funds , *! "nterpretive 78. -hich of the following statements is not correctB a. "f GDP is rising faster than de/t, the government is, in some sense, living within its means. /. The ratio of de/t to GDP in the 9nited tates has always /een less than one. c. De/ts during wars may distri/ute the /urden of fighting the war more evenly across generations. d. During times of peace the ratio of de/t to GDP sometimes rose.
AN ! 1 D"#! & $%#! &'-0 NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! Government de/t , *! "nterpretive 8:. "n recent years the 9. . national de/t has /een a/out a. 1:-&: percent of GDP. /. 0:-3: percent of GDP. c. 5:-': percent of GDP. d. 6:-7: percent of GDP.
AN ! 1 D"#! 1 $%#! &'-0 NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! Government de/t , *! Definitional 81. The ratio of de/t to GDP in the 9nited tates tended to fall a. during wars. /. during the late 188:s. c. during the first half of this decade d. None of the a/ove is correct.
AN ! 1 D"#! 1 $%#! &'-0 NAT! Analytic ()*! The tudy of economics, and definitions of economics T)P! Government de/t , *! Definitional
&'6
8&.

The source of the supply of loana/le funds is a. saving, and the source of the demand for loana/le funds is investment. /. consumption, and the source of the demand for loana/le funds is investment. c. investment, and the source of the demand for loana/le funds is saving. d. the interest rate, and the source of the demand for loana/le funds is saving.
AN ! A D"#! 1 $%#! &'-0 NAT! Analytic ()*! 9nderstanding and applying economic models T)P! ,ar.et for loana/le funds , *! "nterpretive 80. "n the mar.et for loana/le funds, the interaction of the demand for, and supply of, loana/le funds determines the e4uili/rium level of a. the inflation rate. /. gross domestic product. c. the real interest rate. d. the nominal interest rate.
AN ! * D"#! 1 $%#! &'-0 NAT! Analytic ()*! 9nderstanding and applying economic models T)P! ,ar.et for loana/le funds , *! "nterpretive 83. uppose the government changed the ta2 laws, with the result that people were encouraged to consume more and save less. 9sing the loana/le funds model, a conse4uence would /e a. lower interest rates and lower investment. /. lower interest rates and greater investment. c. higher interest rates and lower investment. d. higher interest rates and higher investment.
AN ! * D"#! & $%#! &'-0 NAT! Analytic ()*! 9nderstanding and applying economic models T)P! ,ar.et for loana/le funds , *! "nterpretive 85. According to the loana/le funds model, which of the following events would result in higher interest rates and greater savingB a. #irms /ecome pessimistic a/out the future and, as a result, they cut /ac. on their plans to /uy new e4uipment and /uild new factories. /. The government goes from running a /udget deficit to running a /udget surplus. c. *ongress passes a reform of the ta2 laws that encourages greater saving. d. *ongress passes a reform of the ta2 laws that encourages greater investment.
AN ! D D"#! & $%#! &'-0 NAT! Analytic ()*! 9nderstanding and applying economic models T)P! ,ar.et for loana/le funds , *! "nterpretive 8'. -hich of the following counts as part of the supply of loana/le fundsB a. /an. deposits and purchases of /onds /. /an. deposits /ut not purchases of /onds c. purchases of /onds /ut not /an. deposits d. neither purchases of /onds nor /an. deposits
AN ! A D"#! 1 $%#! &'-0 NAT! Analytic ()*! The study of economics, and definitions of economics T)P! ,ar.et for loana/le funds , *! Definitional 86. -hich of the following is included in the demand for loana/le fundsB a. investment and government /orrowing /. investment /ut not government /orrowing c. government /orrowing /ut not investment d. neither government /orrowing nor investment
AN ! 1 D"#! & $%#! &'-0 NAT! Analytic ()*! The study of economics, and definitions of economics T)P! ,ar.et for loana/le funds , *! Definitional

87. -hich of the following is correctB a. "n a closed economy e4uili/rium in the mar.et for loana/le funds occurs where saving J investment. /. "nvestment is the source for the supply of loana/le funds. c. "f there is a surplus in the mar.et for loana/le funds, the interest rate rises. d. All of the a/ove are correct
&'7
AN ! A D"#! & $%#! &'-0 NAT! Analytic ()*! The study of economics, and definitions of economics T)P! %4uili/rium + ,ar.et for loana/le funds , *! Analytic 88. A policy that induces people to save more shifts a. the supply of loana/le funds and raises interest rates. /. the supply of loana/le funds and reduces interest rates. c. the demand for loana/le funds and raises interest rates. d. the demand for loana/le funds and reduces interest rates. D"#! & $%#! &'-0 ()*! The study of economics, and definitions of economics , *! "nterpretive
AN ! 1 NAT! Analytic T)P! aving
1::. "f the government instituted an investment ta2 credit, then which of the following would /e higher in e4uili/riumB a. saving and the interest rate /. saving /ut not the interest rate c. the interest rate /ut not saving d. neither saving nor the interest rate AN ! A D"#! & $%#! &'-0 NAT! Analytic ()*! The study of economics, and definitions of economics T)P! "nvestment ta2 credit , *! Analytic 1:1. "f the /udget deficit increases then a. saving and the interest rate rise /. saving rises and the interest rate falls c. saving falls and the interest rate rises d. saving and the interest rate falls AN ! * D"#! & $%#! &'-0 NAT! Analytic ()*! The study of economics, and definitions of economics T)P! 1udget deficits , *! Analytic 1:&. -hich of the following are effects of an increased /udget deficitB a. the supply of loana/le funds does not changeO a higher interest rate reduces private saving /. the supply of loana/le funds does not changeO a higher interest rate raises private saving c. at any interest rate the supply of loana/le funds is lessO a higher interest rate reduces private saving d. at any interest rate the supply of loana/le funds is lessO a higher interest rate raises private saving AN ! D D"#! 0 $%#! &'-0 NAT! Analytic ()*! The study of economics, and definitions of economics T)P! 1udget deficits , *! Analytic
&'8
Fig)re 26%(+ The 0ig)re depicts a demand%0*r%l*ana1le%0)nds c)rve and t2* s)pply%*0%l*ana1le%0)nds c)rves+
&
Demand
1:0. Re0er t* Fig)re 26%(+ -hat is measured along the vertical a2is of the graphB a. the nominal interest rate /. the real interest rate c. the 4uantity of investment d. the 4uantity of saving AN ! 1 D"#! 1 $%#! &'-0 NAT! Analytic ()*! 9nderstanding and applying economic models T)P! ,ar.et for loana/le funds , *! "nterpretive 1:3. Re0er t* Fig)re 26%(+ -hich of the following events would shift the supply curve from 1 to &B a. "n response to ta2 reform, firms are encouraged to invest more than they previously invested. /. "n response to ta2 reform, households are encouraged to save more than they previously saved. c. Government goes from running a /alanced /udget to running a /udget deficit. d. Any of the a/ove events would shift the supply curve from 1 to &. AN ! 1 D"#! & $%#! &'-0 NAT! Analytic ()*! 9nderstanding and applying economic models T)P! ,ar.et for loana/le funds , *! "nterpretive Fig)re 26%2+ The 0ig)re depicts a s)pply%*0%l*ana1le%0)nds c)rve and t2* demand%0*r%l*ana1le%0)nds c)rves+
upply
D& D1
1:5. Re0er t* Fig)re 26%2+ -hat is measured along the hori@ontal a2is of the graphB a. the 4uantity of loana/le funds /. the si@e of the government /udget deficit or surplus c. the real interest rate d. the nominal interest rate

AN ! A D"#! 1 $%#! &'-0 NAT! Analytic ()*! 9nderstanding and applying economic models T)P! ,ar.et for loana/le funds , *! "nterpretive 1:'. Re0er t* Fig)re 26%2+ -hich of the following events would shift the demand curve from D1 to D&B a. The government goes from running a /udget deficit to running a /udget surplus. /. #irms /ecome optimistic a/out the future and, as a result, they plan to increase their purchases of new e4uipment and construction of new factories. c. A change in the ta2 laws encourages people to consume less and save more. d. A change in the ta2 laws encourages people to consume more and save less. AN ! 1 D"#! & $%#! &'-0 NAT! Analytic ()*! 9nderstanding and applying economic models T)P! ,ar.et for loana/le funds , *! "nterpretive
&6:
Fig)re 26%3+ The figure shows two demand-for-loana/le-funds curves and two supply-of-loana/le-funds curves.
i
&
*
1
# A D&
D1
1:6. Re0er t* Fig)re 26%3+ -hat, specifically, does the la/el on the vertical a2is, i, representB a. the nominal interest rate /. the real interest rate c. the inflation rate d. the dividend yield AN ! 1 D"#! 1 $%#! &'-0 NAT! Analytic ()*! 9nderstanding and Applying %conomic ,odels T)P! ,ar.et for loana/le funds , *! "nterpretive 1:7. Re0er t* Fig)re 26%3+ A shift of the supply curve from S1 to S& is called a. an increase in the supply of loana/le funds. /. an increase in the 4uantity of loana/le funds supplied. c. a decrease in the supply of loana/le funds. d. a decrease in the 4uantity of loana/le funds supplied. AN ! * D"#! & $%#! &'-0 NAT! Analytic ()*! 9nderstanding and Applying %conomic ,odels T)P! ,ar.et for loana/le funds , *! "nterpretive
&61
1:8. Re0er t* Fig)re 26%3+ A shift of the demand curve from $1 to $& is called a. an increase in the demand for loana/le funds, and that increase would originate from people who had some e2tra income they wanted to lend. /. an increase in the demand for loana/le funds, and that increase would originate from households and firms who wish to /orrow to ma.e investments. c. a decrease in the demand for loana/le funds, and that decrease would originate from people who had some e2tra income they wanted to lend. d. a decrease in the demand for loana/le funds, and that decrease would originate from households and firms who wish to /orrow to ma.e investments. AN ! 1 D"#! & $%#! &'-0 NAT! Analytic ()*! 9nderstanding and Applying %conomic ,odels T)P! ,ar.et for loana/le funds , *! "nterpretive 11:. Re0er t* Fig)re 26%3+ -hich of the following movements shows the effects of the government going from a /udget deficit to a /udget surplusB a. a movement from Point A to Point 1 /. a movement from Point 1 to Point A c. a movement from Point A to Point # d. a movement from Point * to Point 1 AN ! 1 D"#! & $%#! &'-0 NAT! Analytic ()*! 9nderstanding and Applying %conomic ,odels T)P! 1udget deficits + 1udget surpluses , *! Applicative 111. Re0er t* Fig)re 26%3+ -hich of the following movements shows the effects of a new law that ma.es more people than /efore eligi/le for "ndividual $etirement AccountsB a. a movement from Point A to Point 1 /. a movement from Point 1 to Point # c. a movement from Point * to Point # d. a movement from Point * to Point 1 AN ! * D"#! & $%#! &'-0 NAT! Analytic ()*! 9nderstanding and Applying %conomic ,odels T)P! 1udget deficits + 1udget surpluses , *! Applicative 11&. Re0er t* Fig)re 26%3+ -hich of the following movements would /e consistent with the government /udget going from deficit to surplus and the simultaneous enactment of an investment ta2 creditB a. a movement from Point A to Point * /. a movement from Point 1 to Point A c. a movement from Point 1 to Point # d. a movement from Point * to Point 1 AN ! * D"#! 0 $%#! &'-0 NAT! Analytic ()*! 9nderstanding and Applying %conomic ,odels T)P! 1udget deficits + 1udget surpluses + "nvestment ta2 credit , *! Analytical

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Chapter 26 Saving, Investment, and the Financial System

*hapter &'; aving, "nvestment, and the #inancial ystem

*hapter &'; aving, "nvestment, and the #inancial ystem

*hapter &'; aving, "nvestment, and the #inancial ystem

*hapter &'; aving, "nvestment, and the #inancial ystem

*hapter &'; aving, "nvestment, and the #inancial ystem

*hapter &'; aving, "nvestment, and the #inancial ystem

,ar.et for loana/le funds

*hapter &'; aving, "nvestment, and the #inancial ystem

Sec$$ % Saving, Investment, and the Financial System

AN ! A NAT! Analytic T)P! "nvestment &.

AN ! 1 NAT! Analytic T)P! "nvestment

*hapter &'; aving, "nvestment, and the #inancial ystem

AN ! A NAT! Analytic T)P! aving 6.

AN ! D NAT! Analytic T)P! "nvestment 7.

*hapter &'; aving, "nvestment, and the #inancial ystem

AN ! A NAT! Analytic T)P! 1onds 0.

AN ! A NAT! Analytic T)P! 1onds 3.

AN ! D NAT! Analytic T)P! 1onds 5.

AN ! * NAT! Analytic T)P! 1onds

*hapter &'; aving, "nvestment, and the #inancial ystem

AN ! D NAT! Analytic T)P! 1onds 6.

AN ! * NAT! Analytic T)P! toc. + 1onds 7.

AN ! A NAT! Analytic T)P! toc. + 1onds 8.

AN ! 1 NAT! Analytic T)P! toc. + 1onds 1:.

*hapter &'; aving, "nvestment, and the #inancial ystem

AN ! 1 NAT! Analytic T)P! 1onds 13.

AN ! A NAT! Analytic T)P! 1onds 1'.

AN ! 1 NAT! Analytic T)P! 1onds 16.

*hapter &'; aving, "nvestment, and the #inancial ystem

AN ! D NAT! Analytic T)P! 1onds &&.

AN ! * NAT! Analytic T)P! 1onds

*hapter &'; aving, "nvestment, and the #inancial ystem

AN ! 1 NAT! Analytic T)P! 1onds &5.

AN ! * NAT! Analytic T)P! Perpetuities &'.

AN ! A NAT! Analytic T)P! 1onds &6.

AN ! 1 NAT! Analytic T)P! 1onds &7.

AN ! A NAT! Analytic T)P! Perpetuities &8.

AN ! 1 NAT! Analytic T)P! 1onds

*hapter &'; aving, "nvestment, and the #inancial ystem

AN ! D NAT! Analytic T)P! 1onds 01.

AN ! 1 NAT! Analytic T)P! 1onds + $is. 0&.

AN ! A NAT! Analytic T)P! 1onds + $is. 00.

AN ! A NAT! Analytic T)P! 1onds + $is. 05.

AN ! * NAT! Analytic T)P! 1onds + $is.

*hapter &'; aving, "nvestment, and the #inancial ystem

AN ! 1 NAT! Analytic T)P! 1onds + $is. 06.

AN ! * NAT! Analytic T)P! 1onds + $is. 07.

AN ! 1 NAT! Analytic T)P! 1onds 08.

*hapter &'; aving, "nvestment, and the #inancial ystem

AN ! D NAT! Analytic T)P! 1onds 3&.

AN ! D D"#! T)P! "nterest on /onds 33.

*hapter &'; aving, "nvestment, and the #inancial ystem

AN ! * NAT! Analytic T)P! 1onds + $is. 37.

AN ! D NAT! Analytic T)P! 1onds 38.

AN ! D T)P! 1onds + toc. 5:.

AN ! * NAT! Analytic T)P! 1onds + toc. 51.

*hapter &'; aving, "nvestment, and the #inancial ystem

AN ! D NAT! Analytic T)P! toc. 50.

AN ! * NAT! Analytic T)P! toc. 5'.

AN ! * NAT! Analytic T)P! toc. 56.

*hapter &'; aving, "nvestment, and the #inancial ystem

AN ! 1 NAT! Analytic T)P! toc. 57.