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Exam 13: Saving, Investment, and the Financial System

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Question 141

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Other things the same, corporate bonds generally feature higher interest rates than U.S. government bonds.

A) True
B) False

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Question 142

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A decrease in taxes on interest income would increase the interest rate.

A) True
B) False

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Question 143

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For an imaginary economy, when the real interest rate is 7 percent, the quantity of loanable funds demanded is $500 and the quantity of loanable funds supplied is $500. Currently, the nominal interest rate is 9 percent and the inflation rate is 4 percent. Currently,

Scenario 13-1. Assume the following information for an imaginary, closed economy. $\begin{array} { l } \text { GDP } = \$ 120,000 ; \text { consumption } = \$ 70,000 ; \text { private savng } = \$ 9,000 \text {; } \\\text { national saving } = \$ 12,000\end{array}$ -Refer to Scenario 13-1. For this economy, government purchases amount to

Fran buys 1,000 shares of stock issued by Miller Brewing. In turn, Miller uses the funds to buy new machinery for one of its breweries.

Which of the following is not always correct for a closed economy?

The supply of loanable funds would shift to the right if either

In a closed economy, if Y and T remained the same, but G rose, and C fell but by less than the rise in G, what would happen to public and national saving?

In which of the following cases would it necessarily be true that national saving and private saving are equal for a closed economy?

In a closed economy, if Y is 10,000, T is 1,000, G is 3,000, and C is 5,000, then

Scenario 13-2. Assume the following information for an imaginary, closed economy. GDP = $200,000; consumption = $120,000; government purchases = $35,000; and taxes = $25,000. -Refer to Scenario 13-2. For this economy, public saving is equal to

Skyline Chili wants to finance the purchase of new equipment for its restaurants. The firm has limited internal funds, so Skyline likely will

You are thinking of buying a bond from Bluestone Corporation. You know that this bond is long term and you know that Bluestone's business ventures are risky and uncertain. You then consider another bond with a shorter term to maturity issued by a company with good prospects and an established reputation. Which of the following is correct?

Table 13-2 $\begin{array} { | l | l | l | l | l | l | l | l | l | } \hline \text { Stack } & \text { Sym } & \text { Yld \% } & \text { P/E } & \text { Val 100s } & \text { Hi } & \text { Lo } & \text { Clase } & \begin{array} { l } \text { Nat } \\\text { Che. }\end{array} \\\hline \text { Baeing Ca. } & \text { BA } & 1.55 & 30.48 & 4,531,600 & 64.78 & 63.70 & 64.62 & + .93 \\\hline \text { Eli Lily and Cu. } & \text { LLY } & 2.60 & 29.71 & 3,765,700 & 58.98 & 58.21 & 58.52 & + .16 \\\hline \text { H. J. Heinz and Ca. } & \text { HNZ } & 3.30 & 15.33 & 1,350,200 & 36.55 & 36.26 & 36.33 & + .21 \\\hline \text { Kellog Cu. } & \text { K } & 2.22 & 20.50 & 1,990,600 & 45.72 & 45.20 & 45.50 & + .24 \\\hline\end{array}$ -Refer to Table 13-2. For which company's stock is the P/E ratio closest to what is historically typical?

Morgan, a financial advisor, has told her clients the following things. Which of her statements is not correct?

A national chain of grocery stores wants to finance the construction of several new stores. The firm has limited internal funds, so it likely will

Potential buyers of ABC Corporation bonds are not concerned about ABC Corporation declaring bankruptcy. Potential buyers of XYZ Corporation bonds are concerned that XYZ Corporation may declare bankruptcy. Which of the following statements is correct?

Which of the following equations represents GDP for a closed economy?

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

What would happen in the market for loanable funds if the government were to increase the tax on interest income?