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Savings and Investment practice problem.pdf

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Department
Economics
Course
ECON 1BB3
Professor
Bridget O' Shaughnessy
Semester
Winter

Description
Chapter 26 Savings and Investment Practice Test Multiple Choice Identify the letter of the choice that best completes the statement or answers the question. ____ 1. Savers a. and borrowers demand money from the financial system. b. and borrowers supply money to the financial system. c. demand money from the financial system; borrowers supply money to the financial system. d. supply money to the financial system; borrowers demand money from the financial system. ____ 2. When large corporations, the federal government, or state and local governments need to borrow to finance their purchases, they usually borrow a. directly from the public by selling bonds. b. directly from the public by buying bonds. c. indirectly from the public by buying bonds. d. None of the above are correct. ____ 3. Stock represents a. a claim to the profits of a firm. b. ownership in a firm. c. equity finance. d. All of the above are correct. ____ 4. Compared to bonds, stocks offer the holder a. higher risk. b. potentially higher return. c. ownership in a firm. d. All of the above are correct. ____ 5. Which of the following is not an important stock exchange in the United States? a. New York Stock Exchange b. American Stock Exchange c. Chicago Mercantile Exchange d. NASDAQ ____ 6. The single most important piece of information about a stock is the a. price-earnings ratio. b. dividend. c. volume. d. price. ____ 7. The amount of revenue a firm receives for the sale of its products minus its costs of production (as measured by its accountants) is the firm's a. earnings. b. retained earnings. c. economic, or real, profit. d. dividend. 1 ____ 8. It is claimed that a secondary advantage of mutual funds is that a. an investor can avoid investment charges and fees. b. they give ordinary people access to loanable funds for investing. c. they give ordinary people access to the skills of professional money managers. d. All of the above are correct. ____ 9. The slope of the supply of loanable funds curve represents the a. positive relation between the real interest rate and investment. b. positive relation between the real interest rate and saving. c. negative relation between the real interest rate and investment. d. negative relation between the real interest rate and saving. ____ 10. If Congress reduced the tax on interest income, a. investment and saving would increase. b. investment and saving would decrease. c. investment would increase and saving would decrease. d. investment would decrease and saving would increase. ____ 11. If the government currently has a budget deficit, a. it does not necessarily have a debt. b. the debt is increasing. c. gover
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