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Finance, Saving, and Investment

25CLICKER QUESTIONS

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26Finance, Saving, and Investment

CLICKER QUESTIONS

Click on the button to go to the QuestionClick on the button to go to the problem

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Question 1

Question 2

Question 3

Question 4

Question 5

Question 7

Question 8

Question 6

Question 9

Question 10

Checkpoint 26.1 Checkpoint 26.2 Checkpoint 26.3

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CHECKPOINT 26.1

A. firms purchase their physical capitalB. firms supply their goods and servicesC. households supply their labor servicesD. firms get the funds that they use to buy physical capitalE. the government borrows to fund any budget surplus

Question 1Economists use the term “financial markets” to mean the markets in which _______.

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CHECKPOINT 26.1

A. negative; illiquid but not necessarily insolventB. negative; insolvent but not necessarily illiquidC. positive; illiquid and insolventD. negative; illiquid and insolventE. positive; insolvent but not necessarily illiquid

Question 2If the market value of what a financial institution has lent is less than the market value of it has borrowed, then the financial institution’s net worth is ____ and it is ____.

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CHECKPOINT 26.1

A. borrowing in the bond marketB. lending in the bond marketC. lending in the loan marketD. borrowing in the loan marketE. lending in the stock market

Question 3When a student uses a credit card to buy an iPod, the student is ________.

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CHECKPOINT 26.2

A. increases the quantity of loanable funds suppliedB. increases the supply of loanable funds but does not

change the demand for loanable fundsC. decreases the supply of loanable funds but does not

change the demand for loanable funds D. decreases the quantity of loanable funds suppliedE. decreases the supply of loanable funds and increases

the demand for loanable funds

Question 4A fall in the real interest rate ______.

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CHECKPOINT 26.2

A. wealth; increasesB. expected profit; increasesC. default risk; decreasesD. expected future income;

decreasesE. disposable income; increases

Question 5The figure illustrates the effect of an increase in ____. As a result investment ____.

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CHECKPOINT 26.2

A. demand for; increases; risesB. supply of; increases; fallsC. demand for; decreases; risesD. supply of; decreases; fallsE. demand for; decreases; falls

Question 6If firms expect their profit to fall, the _____ loanable funds ____ and the real interest rate ____.

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CHECKPOINT 26.2

A. an increase in the supply of; an increase

B. an increase in the demand for; an increase

C. a decrease in the supply of; a decrease

D. a decrease in the demand for; a decrease

E. a decrease in both the supply of and demand for; no change

Question 7An increase in wealth leads to ____ loanable funds and _______ in investment.

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CHECKPOINT 26.3

A. private saving and investment are equalB. private saving exceeds investment by an amount equal

to the government surplus C. investment exceeds private saving by an amount equal

to the government surplusD. private saving minus the government surplus equals

investmentE. private saving exceeds investment and government

saving is negative.

Question 8When the government has a budget surplus, _____.

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CHECKPOINT 26.3

A. raises the real interest rate and decreases the supply of loanable funds

B. lowers the real interest rate and increases the demand for loanable funds

C. raises the real interest rate and decreases savingD. raises the real interest rate and decreases investmentE. lowers the real interest rate and increases investment

Question 9The “crowding-out effect” refers to how a government budget deficit ______.

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CHECKPOINT 26.3

A. increased investment and a higher real interest rateB. increased saving and a lower real interest rateC. increased saving and no change in the real interest rateD. an increase in demand for loanable funds and a higher

real interest rateE. a fall in the real interest rate and an increase in the

investment

Question 10The Ricardo-Barro effect says that a government budget deficit leads to ________.