Macro Eco HW CH 13

The economy’s two most important financial markets are the bond market and the stock market.
Two of the economy’s most important financial intermediaries are banks and mutual funds.
We associate the term debt finance with the bond market, and we associate the term equity finance with the stock market.
The length of time until a bond matures is called the
Which of the following is a certificate of indebtedness? bonds but not stocks
A stock index is average of a group of stock prices
Financial intermediaries are financial institutions through which savers can indirectly provide funds to borrowers
Which of the following are financial intermediaries? both banks and mutual funds
Which of the following is an example of financial inter-mediation?
A checking deposit functions as a medium of exchange and as a store of value.
The primary advantage of mutual funds is that they allow people to diversify and reduce risk
Which of the following is not a characteristic of a bond? its dividend yield
The bond market, the stock market, banks, pension funds, and insurance companies are all financial institutions.
A closed economy both A and BA-does not engage in international trade of goods and services.B-does not engage in international borrowing or lending.
In a closed economy, what does (T – G) represent? public saving
A closed economy does not engage in international trade, therefore net exports (NX) are zero.
Which of the following equations represents GDP for a closed economy? Y = C + I + G
If the tax revenue of the federal government is less than its spending, then the federal government necessarily runs a budget deficit.
An increase in the government’s budget surplus means public saving is greater than $0 and increasing
National saving the total income in the economy that remains after paying for consumption and government purchases
The slope of the demand for loanable funds curve represents the negative relation between the real interest rate and investment.
Other things the same, a higher interest rate induces people to save more, so the supply of loanable funds slopes upward.
If the quantity of loanable funds demanded exceeds the quantity of loanable funds supplied, there is a shortage and the interest rate is below the equilibrium level.
A budget deficit changes the supply of loanable funds.
The source of the supply of loanable funds is is saving and the source of demand for loanable funds is investment

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