Q&A Hero

Q: Decisions of ________ determine the magnitude of the monetary multiplier. A) only the Fed B) only the public C) both the Fed and the public D) neither the Fed nor the public E) the Fed and the U.S. Congress

Q: When we keep part of our wealth in a bank checking account, we are using money as a ________ because ________. A) store of value; we are holding the money to exchange for goods at a later time B) medium of exchange; we are holding the money to gain interest earned C) barter token; we are holding the money to exchange for goods at a later time D) unit of account; we are holding the money to exchange for goods at a later time E) unit of currency; we have agreed upon the value of the money with bank

Q: A stockholder ________ an owner of the firm, and a bondholder ________ an owner of the firm. A) is; is B) is; is not C) is not; is D) is not; is not E) might be; is not

Q: A distinction between stocks and bonds is that A) bonds can be traded many times in the bond market, while stocks are non-transferable. B) although the return on a bond is determined by the forces of supply and demand, the return on a stock is set by the stock exchange. C) bonds cannot be sold to anyone other than the company that issued it while stocks can be resold to anyone. D) stocks represent ownership claims to the company and bonds do not. E) bonds must be held for a fixed number of years whereas stocks can be bought and sold at any time.

Q: Which of the following represents ownership of a firm? A) stocks B) bonds C) short-term securities D) loans E) commodities

Q: Which of the following are typically financed in a "stock market"? i. shares sold by a firm to finance its international growth plans ii. new mortgages for home buyers iii. credit card balances A) i only B) i, ii and iii C) ii and iii D) ii only E) i and iii

Q: A certificate of ownership and claim to part of a firm's profits is called A) a stock. B) a bond. C) a certificate of deposit. D) depreciation. E) physical capital.

Q: A share of stock is a A) promise to pay specified sums of money on specified dates. B) certificate of ownership and claim to the profits made by a firm. C) collection of funds that travels the world looking for the highest return. D) set of demanders and suppliers for the savings of households. E) form of investment in physical capital.

Q: Lulu purchased a security that promises to pay $50 twice a year from January 15, 2012 to January 15, 2016 and then pay $1,000 on January 15, 2016. The security is a debt to the company that issued it. The security is a A) depreciating asset. B) bond. C) share of stock. D) physical capital. E) net investment to the company that issued it.

Q: Which of the following are typically financed in a "bond market"? i. a mortgage for a house ii. state government borrowing for a new road project iii. your purchase of 4000 shares of stock in Google A) ii only B) i and ii C) ii and iii D) i only E) i and iii

Q: Which of the following are typically financed in the loan market? i. a mortgage for a house iii. credit card balances iii. the purchase of a share of stock in a corporation. A) i and iii B) i only C) i, ii and iii D) i and ii E) ii and iii

Q: When Bank of America finances your purchase of a new car, you are A) lending in the capital market. B) borrowing in the bond market. C) lending in the bond market. D) borrowing in the loan market. E) borrowing in the stock market.

Q: A document that promises to pay specified sums of money on specified dates and is a debt to the issuer is called A) a stock. B) a bond. C) net investment. D) depreciation. E) gross investment.

Q: To acquire financial capital, a firm can i. obtain a loan from a bank. ii. issue stock. iii. issue bonds. A) i only B) ii only C) iii only D) i and iii E) i, ii, and iii

Q: During the year a country's income was $6.0 trillion and its consumption was $5.5 trillion. At the start of the year its wealth was $30.0 trillion. The country's wealth at the end of the year was A) $30.0 trillion. B) $30.5 trillion. C) $35.5 trillion. D) $36.0 trillion. E) $6.0 trillion.

Q: Assuming there are no capital gains, a nation's wealth at the start of a year is equal to the wealth at the start of the previous year plus A) nothing because wealth does not change from one year to the next. B) income. C) saving during the year. D) income minus saving during the year. E) saving minus depreciation during the year.

Q: During this year, Barbara earned $60,000 as a financial analyst, paid taxes of $5,000 and consumed $53,000. If Barbara's wealth was $4,000 at the beginning of the year, at the end of the year Barbara's wealth was A) $2,000. B) $4,000. C) $5,000. D) $6,000. E) $60,000.

Q: If capital gains equal zero, then the Ng family's wealth at the end of the year equals their wealth at the beginning of the year A) minus personal income taxes. B) plus saving. C) minus consumption. D) plus income. E) plus consumption minus income.

Q: A household increases its wealth by A) spending more on consumption goods. B) saving. C) increasing its capital consumption. D) decreasing its depreciation. E) making sure that its net investment exceeds its gross investment.

Q: Wealth is A) defined as the money in your savings account. B) another name for income. C) the value of all the things that a person owns. D) equivalent to saving. E) the same as investment in financial capital.

Q: Economists use the term wealth to mean A) the same thing as income. B) what a person earns. C) what a person owns. D) the amount of income that is spent and not saved. E) a person's investment.

Q: Wealth is to ________ as capital stock is to ________. A) saving; investment B) income; earnings C) investment; saving D) income; net investment E) saving; depreciation

Q: U.S. capital at the end of 2012 equals U.S. capital at the beginning of 2012 plus A) nothing, because capital can't change in just one year. B) gross investment during 2012. C) gross investment during 2012 minus net investment in 2012. D) net investment during 2012. E) depreciation during 2012 minus gross investment during 2012.

Q: The difference between the amount of capital at the beginning of a year and the amount of capital at the end of the year is equal to A) net investment. B) capital consumption. C) gross investment. D) financial consumption. E) depreciation.

Q: Which of the following equals the change in an economy's capital stock from one period to the next? A) depreciation B) gross investment C) net investment D) wealth E) stock

Q: The change in the quantity of capital from one period to the next is equal to A) net investment. B) gross investment. C) depreciation. D) financial investment. E) wealth.

Q: During 2013, a country's total purchases of newly produced capital goods are $1,000 billion, the country issues $750 billion of stock certificates, and there is $200 billion of depreciation. Net investment in this country equals A) $800 billion. B) $1,550 billion. C) $1,000 billion. D) $1,750 billion. E) $550 billion.

Q: On January 1, Derek had CD recording devices valued at $30,000. During the year, the value of Derek's devices depreciated by $20,000. He spent $30,000 on new devices. Derek's net investment was ________ and at the end of the year Derek had capital valued at ________. A) $10,000; $40,000 B) $30,000; $40,000 C) $20,000; $60,000 D) $40,000; $70,000 E) $10,000; $60,000

Q: On January 1, Rick's Photo owned $50,000 of equipment. During the year, the value of the equipment fell by $10,000, plus Rick bought $25,000 in new equipment. Rick's company experienced ________ because ________. A) net investment of $15,000; net investment equals gross investment minus depreciation B) gross investment of $15,000; gross investment equals net investment minus depreciation C) gross investment of $40,000; gross investment equals net investment plus depreciation D) net investment of $15,000; net investment equals beginning year financial capital minus depreciations and investment E) depreciation of $15,000; depreciation equals investment in new products minus loss in values

Q: On January 1, Rick's Photo owned $50,000 of equipment. During the year, the value of the equipment fell by $10,000, plus Rick bought $25,000 in new equipment. Rick's company experienced A) net investment of $15,000. B) an increase in financial capital of $65,000. C) a decrease in financial capital of $15,000. D) depreciation of $15,000. E) gross investment of $50,000.

Q: At the beginning of the year, AAA-1 Towing owns trucks and buildings for a total value of $1 million. During the year, it invests $250,000 to replace towing trucks worth $230,000 destroyed in a flood and to cover $50,000 worth of depreciation. AAA-1 Towing's capital stock at the end of the year was A) $970,000. B) $1,250,000. C) $950,000. D) $1,280,000. E) $1,020,000.

Q: At the beginning of the year, AAA-1 Towing owns trucks and buildings for a total value of $1 million. During the year, it invests $250,000 to replace towing trucks worth $230,000 destroyed in a flood and to cover $50,000 worth of depreciation. AAA-1 Towing's net investment was A) $200,000. B) $20,000. C) $280,000. D) -$30,000. E) $250,000.

Q: Bill's Lawn service starts the year with 20 lawn mowers. During the year, 3 mowers break and are not worth fixing. Bill also expands his business and buys 10 more mowers. Bill's capital at the end of the year is ________ mowers. A) 20 B) 30 C) 27 D) 33 E) 10

Q: Bill's Lawn service starts the year with 20 lawn mowers. During the year, 3 mowers break and are not worth fixing. Bill also expands his business and buys 10 more mowers. Bill's net investment is ________ mowers. A) 10 B) 13 C) 7 D) 27 E) 20

Q: The local Allied Moving Company begins this year with capital equal to $250,000. During the year the firm depreciates $150,000 worth of its capital and ends the year with capital equal to $250,000. Which statement correctly summarizes Allied Moving Company's investment? A) Allied Moving Company made no capital investment during the year. B) Allied Moving Company made no gross investment during the year. C) Allied Moving Company made no net investment during the year. D) Allied Moving Company made net investment of $150,000 during the year. E) Allied Moving Company made gross investment of $250,000 during the year.

Q: The table above gives the demand for loanable funds and private supply of loanable funds schedules. a. What is the equilibrium real interest rate and quantity of loanable funds? b. Suppose that the government has a budget surplus of $2.5 billion. If there is no Ricardo-Barro effect, what is the equilibrium real interest rate and quantity of loanable funds?

Q: The Zonamo company produces waste disposal machines and sells them to militaries all over the world. The company started last year with $10 million of capital on hand and invested $15 million in new capital throughout the year. At the end of the year, the company's capital stock was $17 million. Hence, for the year, depreciation equaled ________ and net investment equaled ________. A) $8 million; $7 million B) $7 million; $8 million C) $25 million; $5 million D) $5 million; $5 million E) $8 million; $15 million

Q: According to the Ricardo-Barro effect, what is the effect on the real interest rate of a government budget surplus?

Q: If an economy's depreciation is greater than its gross investment, then A) net investment is positive and saving is negative. B) the economy's capital stock decreases. C) net investment is positive and saving is positive. D) net investment is negative and saving is negative. E) net investment must equal saving.

Q: According to the Ricardo-Barro effect, if the government runs a budget deficit of $100 billion, by how much does the amount of equilibrium investment increase or decrease?

Q: Which of the following statements is correct? A) Gross investment minus financial capital equals net investment. B) Net investment plus depreciation equals gross investment. C) Net investment plus corporate profits equals gross investment. D) Net investment is greater than gross investment. E) Net investment minus depreciation equals gross investment.

Q: Discuss why a budget deficit results in a different real interest rate under the Ricardo-Barro effect than under the crowding-out effect.

Q: Net investment is A) the same as gross investment. B) the same as depreciation. C) gross investment minus depreciation. D) gross investment plus depreciation. E) the same as wealth.

Q: What is the crowding-out effect and how does it operate? What is its relationship to the Ricardo-Barro effect?

Q: Net investment equals A) gross financial capital minus stock dividends. B) depreciation plus gross investment. C) gross investment minus interest payments. D) gross investment minus depreciation. E) depreciation minus gross investment.

Q: According to the crowding-out effect, if the government runs a budget deficit of $100 billion, what is the change in the equilibrium quantity of investment?

Q: Net investment equals A) new capital plus old capital. B) capital plus depreciation. C) gross investment minus depreciation. D) gross investment plus depreciation. E) the amount of national wealth.

Q: "A government surplus can decrease investment through the crowding-out effect because the surplus decreases the supply of loanable funds." Is the previous assertion right or wrong? Why?

Q: Gross investment equals A) net investment plus depreciation. B) net investment minus depreciation. C) gross financial capital minus depreciation. D) gross financial capital plus depreciation. E) net investment financial investment.

Q: "The crowding-out effect occurs when a government budget surplus reduces private savings." Is the previous statement true or false? Explain your answer.

Q: On January 1, Rick's Photo owned $50,000 of equipment. During the year, the value of the equipment fell by $10,000, plus Rick bought $25,000 in new equipment. Rick's company experienced A) $10,000 of depreciation. B) $40,000 of depreciation. C) an increase of new capital by $10,000. D) an increase of net investment of $35,000. E) a change in total financial capital of $15,000.

Q: Explain how a government budget deficit might crowd out private investment.

Q: During the year, suppose a country's total purchases of newly produced capital goods is $2,000 billion, issues $1,600 billion of stock certificates, and has $500 billion in depreciation. Gross investment in this country equals A) $2,000 billion. B) $2,500 billion. C) $3,600 billion. D) $4,100 billion. E) $2,100 billion.

Q: Ignoring the Ricardo-Barro effect, what impact does the government have in the loanable funds market?

Q: Bill's Lawn service starts the year with 20 lawn mowers. During the year, 3 mowers break and are not worth fixing. Bill also expands his business and buys 10 more mowers. Bill's gross investment is ________ mowers. A) 10 B) 13 C) 7 D) 27 E) 30

Q: Using the figure above, show the effect on the real interest rate and the quantity of loanable funds of an increase in expected profit.

Q: The total amount spent to buy new physical capital and replace old capital is referred to as A) depreciation. B) net investment. C) savings. D) gross investment. E) wealth.

Q: The table above shows the supply of loanable funds and the demand for loanable funds schedules. a. What is the equilibrium real interest rate and the equilibrium quantity of loanable funds? b. If the real interest rate is 4 percent, is there a shortage or surplus? What will happen in the market?

Q: Which of the following is correct? A) Gross investment equals net investment minus depreciation. B) Net investment is the same as capital consumption. C) Gross investment is the total spent on capital. D) Net investment is the total spent on capital. E) The change in the nation's capital stock over a year equals the amount of gross investment.

Q: Suppose a government tax cut increases disposable income. If there is no change in the government deficit or surplus, what effect would this tax cut have on the supply of loanable funds and the demand for loanable funds? What will happen to the real interest rate?

Q: The total amount spent on new capital goods is called A) net investment. B) gross investment. C) depreciation. D) financial capital. E) wealth.

Q: How does each of the following shift the supply of loanable funds and the demand for loanable funds curves? What is the effect of each on the equilibrium real interest rate and equilibrium quantity of loanable funds? a. Households' disposable incomes increase b. An increase in expected profit

Q: ________ decreases a firm's capital stock, and ________ increases its capital stock. A) Saving; depreciation B) Saving; investment C) Depreciation; investment D) Time; depreciation E) Investment; saving

Q: In the loanable funds market, what will change to eliminate a shortage of loanable funds and how is the shortage eliminated?

Q: ________ increases the quantity of capital, and ________ decreases the quantity of capital. A) Net investment; gross investment B) Investment; depreciation C) Depreciation; net investment D) Investment; saving E) Gross investment; net investment

Q: "In the loanable funds market, when there is a shortage of funds, the real interest rate will increase." Explain whether the previous statement is correct or not.

Q: An example of financial capital is A) machines. B) buildings. C) computers. D) bonds. E) the talents of a highly paid movie star.

Q: "A shortage in the loanable funds market occurs when the quantity of loanable funds supplied exceeds the quantity of loanable funds demanded." Explain why this statement is correct or incorrect.

Q: The funds firms use to buy and operate physical capital are referred to as A) physical capital. B) financial capital. C) government capital. D) human capital. E) business capital.

Q: Explain how each of the following events would affect the supply of loanable funds curve: a. The economy is in a recession so people's disposable income is lower. b. The stock market is booming so people's wealth is higher. c. The future looks a bit more grim, so expected future income is lower. d. The real interest rate increases.

Q: Financial capital is used to help finance A) consumption expenditure by households. B) the purchase of physical capital by firms. C) gross investment but not net investment. D) net investment but not gross investment. E) people's savings.

Q: What are the factors that change saving and shift the supply of loanable funds curve?

Q: Financial capital A) is accumulated investment. B) is another name for the machines and tools that businesses buy. C) is independent of physical capital. D) depends on saving and borrowing decisions. E) depreciates each year.

Q: Does a change in the real interest rate shift the supply of loanable funds curve? Explain your answer.

Q: The distinction between physical and financial capital is that A) physical capital is equal to financial capital plus depreciation. B) financial capital is used to purchase and operate physical capital. C) the value of financial capital depends on the amount of available physical capital. D) physical capital is equal to financial capital minus depreciation. E) financial capital depreciates and physical capital does not.

Q: How does an increase in expected profit affect investment demand and the demand for loanable funds curve?

Q: Federal Express's purchase of trucks and planes A) is financial capital. B) includes depreciation. C) is an example of physical capital. D) creates wealth. E) reflects capital gains.

Q: Explain the relationship between the real interest rate and investment demand. Compare that relationship to the relationship between expected profit and investment demand.

Q: Economists use the word "capital" to mean A) the tools, instruments, and other produced goods used to produce goods and services. B) the funds that firms use to buy and operate their businesses. C) purchases in the market for stocks and bonds. D) the workers that firms employ to produce goods and services. E) people's skills and talents.

Q: "An increase in the real interest rate increases the quantity of investment." Is the previous statement correct or incorrect?