2.National savings in a closed economy is: A. the sum of private savings plus the government budget balance B. the tot
2.National savings in a closed economy is:
A. the sum of private savings plus the government budget balance
B. the total saving generated within the economy
C. GDP - C - G
D. all of the above
4.In the closed economy of Sildavia during 2005, government spending was $30 billion, government transfers were $15 billion, consumption was $70 billion, taxes were $35 billion, and GDP was $100 billion. We can conclude that
A. private savings were equal to $10 billion.
B. the government's budget balance was equal to -$10 billion.
C. national savings were equal to $0.
D. all of the above.
6.A business will want to borrow to undertake an investment project when the "internal rate of return" (irr) on that project is
A. less than the interest rate.
B. greater than the interest rate.
C. greater than the exchange rate.
D. equal to the inflation rate.
9.When a corporation borrows money from lenders in exchange for a fixed share of the firm's assets and potential profits, the corporation is
A. taking out a loan.
B. issuing bonds.
C. issuing stocks.
D. liquidating a bank deposit.
11.Financial assets that carry more risk
A. usually have a lower rate of return.
B. usually have a higher rate of return.
C. are purchased by risk-averse buyers.
D. are a hedge against the future.
12.A common strategy to reduce the potential of a large financial loss is
A. to buy and sell assets through a mutual fund, since mutual funds can not lose money.
B. diversification of financial assets, so that their risks of failure are unrelated.
C. to buy financial assets from developing countries, because the rates of return are very high and safe and their national currencies much more stable than the U.S. dollar.
D. all of the above
14.The Efficient Markets Hypothesis states that:
A. stock prices fluctuate following the path of business cycles.
B. at any time stock prices are fairly valued reflecting all currently available information.
C. stock prices move irrationally and rather unpredictably.
D. stock prices are easily manipulated by irrational exuberance.
15.Between 2000 and 2006, there was a â€œhousing bubbleâ€ in the U.S. A â€œbubbleâ€ is:
A. a fluctuation in real estate prices that leads to inherent instability.
B. an increase in real estate prices driven by unrealistic expectations about future prices.
C. a situation where individuals resell their houses very quickly to make quick profit.
D. a situation where unscrupulous investors speculate in the real estate market.