Deck 7: Savings and Investment Process

Question 1

Personal consumption expenditures indicate expenditures by individuals for durable goods, nondurable goods, and services.

Answer 1

True

Question 2

The first stage of financing for an entrepreneurial firm is called the start-up stage.

Answer 2

False

Question 3

The financial account is a summary of the fl ow of funds between one country and all other countries involving foreign investments in fixed assets and financial assets during a specified time period.

Answer 3

True

Question 4

Net exports are the exports of goods minus total imports.

Question 5

GDP includes personal consumption expenditures, government purchases of goods and services, gross private domestic investment, and net exports of goods and services.

Question 6

If the imports of goods and services exceed exports, GDP will be higher.

Question 7

The capital account balance has a major impact on the balance of payments.

Question 8

Government expenditures include only expenditures for goods and services by the federal government.

Question 9

Local governments depend heavily on property taxes for their revenues, while state governments depend largely on sales taxes and special taxes, such as those on tobacco products.

Question 10

The federal government relies primarily on borrowing to support its various expenditure programs.

Question 11

In recent years, the United States has been running large trade deficits with both Japan and China.

Question 12

The third stage of financing for an entrepreneurial firm is called the recovery of investment stage.

Question 13

Benefit payments for individuals amount to over half of total expenditures of the federal government.

Question 14

Gross private domestic investment measures a nation's output of goods and services for a specified period of time.

Question 15

The capital account is a summary of the flow of funds between one country and all other countries involving the transfer of financial assets across country borders during a specified time period.

Question 16

GDP = PCE + GE + GPDI - NE.

Question 17

Net exports are exports of goods and services plus imports of goods and services.

Question 18

Net exports are exports of goods and services minus imports of goods and services.

Question 19

Gross private domestic investment (GPDI) measures fixed investment in residential and nonresidential structures, producers' durable equipment, and changes in business inventories.

Question 20

When taxes and general revenues fail to meet expenditures, a budget deficit occurs.

Question 21

The Senate votes on whether to impeach an official.

Question 22

The largest proportion of government revenue comes from corporate income taxes.

Question 23

The largest proportion of government spending goes to national defense, veterans, and foreign affairs.

Question 24

Voluntary savings are financial assets set aside for use in the future.

Question 25

Savings are impacted only by cyclical movements in the economy.

Question 26

Voluntary savings are financial assets set aside for use in more than one year in the future.

Question 27

The federal debt is the same thing as the budget deficit.

Question 28

Savings surplus occurs when an economic unit has current income that exceeds its direct investment in real assets.

Question 29

The federal government relies primarily on income taxes and social insurance taxes for its revenues.

Question 30

The president sets federal statutory debt limits that restrict the maximum amount of national debt that can be outstanding.

Question 31

Capital consumption adjustments are estimates of depreciation of plant and equipment assets for business purposes.

Question 32

Capital consumption adjustments are estimates of the "using up" of plant equipment assets for businesses.

Question 33

Contractual savings are not determined by current decisions.

Question 34

If impeachment goes to trial, that trial is held in the House of Representatives.

Question 35

A savings deficit occurs when investment in real assets exceeds current income.

Question 36

Mandatory spending is government spending provided by passage of appropriations bills that set aside funds for specific federal agencies and programs.

Question 37

The federal debt of the United States is owned to a large extent by foreign institutions and individuals.

Question 38

Impeachment is a formal legislative process in which charges of "high crimes and misdemeanors" are brought against high-level officials.

Question 39

Savings surplus occurs when all of an economic unit's income is not consumed, but held in the form of cash and other financial assets.

Question 40

The federal debt of the United States is owned to a large extent by China.

Question 41

It is from individuals that most financial intermediaries accumulate capital.

Question 42

Corporate saving for short-term working capital purposes is the most important reason for businesses accumulating financial assets.

Question 43

Undistributed profit is the proportion of after-tax profit paid as dividends to shareholders by a corporation.

Question 44

Contractual savings are savings accumulated on a regular schedule for a specified length of time by prior agreement.

Question 45

Car payments are an example of contractual savings.

Question 46

The personal savings rate is calculated as personal savings divided by pre-tax income.

Question 47

A derivative security is a financial contract that derives its value from a bond, stock, or other asset.

Question 48

In general, the total savings in the United States has decreased during the past 12 years.

Question 49

The anticipation of future events has a little to no effect on savings.

Question 50

The corporate retention rate is simply another term for the corporate savings rate.

Question 51

Voluntary savings are savings accumulated on a regular schedule for a specified length of time by prior agreement.

Question 52

Personal savings are savings accumulated on a regular schedule for a specified length of time by prior agreement.

Question 53

Foreign capital played a significant role in the development of the United States.

Question 54

Tax reform in the form of lower personal income tax rates in the mid-1960s and in the 1970s may have contributed to a higher personal savings rate.

Question 55

Capital market securities are debt securities with maturities less than one year and corporate stocks.

Question 56

Capital market securities include debt securities but not corporate stocks.

Question 57

Dissaving occurs when savings are transferred out of long-term savings and into short-term savings.

Question 58

The primary factors that influence the total amount of savings in an economy in any given period include the trade surplus or deficit and exchange rates.

Question 59

In general, the savings rate in the United States has decreased during the past 40 years.

Question 60

Economic cycles may be viewed as annual events.

Question 61

Municipal bonds can only be issued by cities.

Question 62

Developments in the mortgage markets were major contributors to the severity of the 2007- 08 financial crisis.

Question 63

Fixed rate mortgages are also known as "prime mortgages."

Question 64

A car loan is a type of mortgage.

Question 65

A derivative security is a financial contract that derives its value from a collection of bonds.

Question 66

Credit scores range from about 500 to 700.

Question 67

If personal consumption expenditures are $6 billion, government purchases are $10 billion, gross private domestic investments are $4 billion and net exports are $negative 3 billion, then GDP is:

A) $23 billion
B) $20 billion
C) $17 billion
D) $16 billion

Question 68

If personal consumption expenditures are $1 billion, government purchases are $2 billion, gross private domestic investments are $4 billion and net exports are $5 billion, then GDP is:

A) $12 billion
B) $8 billion
C) $7 billion
D) $2 billion

Question 69

A subprime mortgage is a mortgage made to a borrower with an excellent credit score.

Question 70

Securitization is the process of insuring mortgage loans against default.

Question 71

Personal consumption expenditures (PCE) does not include:

A) individual expenditures for durable goods
B) individual expenditures for nondurable goods
C) individual expenditures for services
D) individual savings

Question 72

Fixed rate mortgages often replaced adjustable rate mortgages just prior to the 2007 - 08 financial crisis.

Question 73

Adjustable rate mortgages typically adjust monthly.

Question 74

Gross domestic product is equal to the sum of all of the following except:

A) personal consumption expenditures
B) net exports
C) government expenditures
D) personal savings in banks

Question 75

The interest paid on municipal bonds is exempt from federal income taxes.

Question 76

Personal consumption expenditures (PCE) include:

A) individual expenditures for durable goods
B) business expenditures for nondurable goods
C) government purchases of goods for individuals
D) foreign purchase of nondurable goods

Question 77

Gross Private Domestic Investment (GPDI) measures fixed investment in:

A) residential and non-residential structures
B) individual expenditures for nondurable goods
C) individual expenditures for services
D) government securities

Question 78

Capital consumption adjustment is also called depreciation.

Question 79

Direct payments to individuals from the Federal government do not include:

A) Social Security payments.
B) Medicare payments
C) health expenditures
D) public transportation subsidies

Question 80

Fixed rate mortgages typically require 20% down payment.