Question 1

Congress and the President allow people to make greater contributions to tax-deferred savings accounts.Which curve in the market for loanable funds would shift,which direction would it shift,what would happen to the interest rate,and what would happen to investment spending?

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Question 2

What happens to desired investment spending if the interest rate rises? Is this response relevant to the supply of loanable funds curve or the demand for loanable funds curve?

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Question 3

What is the source of the supply of loanable funds?

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Question 4

Concerns about the bankruptcy of an appliance manufacturer diminish after a new CEO is appointed and some of the company's less productive factories are sold.What type of risk for bondholders falls? What happens to the interest rate on this company's bonds.

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Question 5

A restaurant chain announces declining revenues.What's the name of the type of risk that this news raises for holders of this chain's bonds? What does this news to do the interest rate on this chain's bonds?

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Question 6

If at some interest rate desired investment is $400 billion,desired private saving is $600 billion,and the budget deficit is $300 billion,is there a surplus or a shortage in the market for loanable funds? What does this imply would happen to interest rates?

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Question 7

Robert buys bonds.Rachel buys a new truck for her landscaping business.Identify both as savers,investors,both,or neither.

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Question 8

What variable adjusts to balance demand and supply in the market for loanable funds?

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Question 9

List three characteristics of a bond that would make its interest rate higher than otherwise.

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Question 10

If the government reduces transfer payments,what happens to the budget deficit? What curve does this change in the market for loanable funds,which direction does it shift,and what happens to the equilibrium interest rate?

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Question 11

Stock in Frozen Dreams,an ice cream manufacturer,has a price to earnings ratio of 24.Is this comparatively high or low? What are two explanations for the size of this company's price to earnings ratio?

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Question 12

If federal tax rates increased,what would happen to the interest rate on municipal bonds?

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Question 13

How do banks make profits?

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Question 14

In the terminology of macroeconomics,what's the difference between a saver and an investor?

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Question 15

If the government budget deficit increases,which curve in the market for loanable funds shifts,which direction does it shift,and what happens to the interest rate?

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Question 16

What is a mutual fund?

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Question 17

In a closed economy private saving is $500 billion and the government budget deficit is $100 billion.What is investment?

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Question 18

Congress and the President implement an investment tax credit.Which curve in the market for loanable funds shifts,which direction does it shift,and what happens to the interest rate?

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Question 19

Suppose there is a shortage in the market for loanable funds.Is the interest rate above or below its equilibrium level? How do desired saving and desired investment at this interest rate compare?

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Question 20

In a closed economy taxes are $750 billion,government transfers are $400 billion,government expenditures are $500 billion,and investment is $400 billion.What are private saving,public saving and national saving?

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Quiz 26: Saving,investment,and the Financial System