Question 1

Given that Monika's income exceeds her expenditures,Monika is best described as a&#10;A)saver or as a supplier of funds.&#10;B)saver or as a demander of funds.&#10;C)borrower or as a supplier of funds.&#10;D)borrower or as a demander of funds.

Accepted Answer

If Monika's income exceeds her expenditures, she would have excess funds that she can save, invest or use to lend to others. Therefore, she can be best described as a saver or a supplier of funds.

Question 2

The financial system does NOT influence&#10;A)long-run economic growth.&#10;B)saving and investment.&#10;C)the amount of capital in the economy.&#10;D)&#8203;the amount of natural resources in the economy.

Accepted Answer

The financial system does not directly influence the amount of natural resources in the economy. However, it does play a role in how those resources are allocated and utilized through its impact on investment and capital formation.

Question 3

Bob's new startup goes public and sells shares of future profits.Bob's startup is best described as a&#10;A)&#8203;saver or as a supplier of funds.&#10;B)&#8203;saver or as a demander of funds.&#10;C)&#8203;borrower or as a supplier of funds.&#10;D)&#8203;borrower or as a demander of funds.

Accepted Answer

By selling shares of future profits, Bob's startup is essentially borrowing money from investors with the promise of repaying them with a portion of future earnings. Therefore, the startup is a borrower and a demander of funds.

Question 4

When a country saves a larger portion of its GDP than it did before,it will have&#10;A)more capital and higher productivity.&#10;B)more capital and lower productivity.&#10;C)less capital and higher productivity.&#10;D)less capital and lower productivity.

Accepted Answer

When a country saves a larger portion of its GDP, it will have more capital available for investment. This will lead to an increase in productivity as more capital can be used to finance projects that will increase productivity, such as improving infrastructure, education, and technology. Therefore, choice A is the best answer.

Question 5

The primary economic function of the financial system is to&#10;A)keep interest rates low.&#10;B)provide expert advice to savers and investors.&#10;C)match one person's consumption expenditures with another person's capital expenditures.&#10;D)match one person's saving with another person's investment.

Accepted Answer

The primary economic function of the financial system is to match one person's saving with another person's investment, which is facilitated by financial intermediaries such as banks, mutual funds, and other financial institutions. This function helps allocate resources efficiently and promotes economic growth. The other options, such as keeping interest rates low or providing expert advice, are secondary functions of the financial system.

Question 6

When opening a print shop you need to buy printers,computers,furniture,and similar items.Economists call these expenditures&#10;A)capital investment.&#10;B)investment in human capital.&#10;C)business consumption expenditures.&#10;D)personal saving.

Accepted Answer

Capital investment refers to the expenditure made by a company to acquire or upgrade their fixed assets, such as machinery, tools, equipment, land, buildings, and vehicles, required for production or operations. In this case, when opening a print shop, the purchases of printers, computers, furniture, and similar items are considered capital investments.

Question 7

If you were to start a business delivering documents,you might need to purchase cell phones,bicycles,desks,and chairs.&#10;A)These purchases are called capital investment.If you raise the funds to purchase them from others you are a saver.&#10;B)These purchases are called capital investment.If you raise the funds to purchase them from others you are a borrower.&#10;C)These purchases are called consumption.If you raise the funds to purchase them from others you are a saver.&#10;D)These purchases are called consumption.If you raise the funds to purchase them from others you are a borrower.

Accepted Answer

These purchases are considered capital investment because they are assets used to start and run the business. If you raise funds from others to make these purchases, you are a borrower.

Question 8

Institutions that help to match one person's saving with another person's investment are collectively called the&#10;A)Federal Reserve system.&#10;B)banking system.&#10;C)monetary system.&#10;D)financial system.

Accepted Answer

The financial system includes institutions such as banks, stock exchanges, mutual funds, and other intermediaries that facilitate the transfer of funds between savers and investors. These institutions help to match one person's saving with another person's investment, making the financial system the correct answer. The Federal Reserve system and monetary system are more specific to the regulation of money and credit in the economy, while the banking system only represents a subset of institutions within the broader financial system.

Deck 26: Sec 260 : Saving Investment and the Financial System