CHAPTER 26 - Chapter26 Saving,Investment, andtheFinancial...

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Chapter 26 Saving, Investment, and the Financial   System 1. Bond markets allow firms to pursue a. equity financing. b. debt financing. c. limited-growth  policies. d. government  loans and  subsidy  programs. ANSWER: b debt financing. SECTION: 1 OBJECTIVE: 1 2. Junk bonds are issues by firms with a. high degrees of financial security. b. business ties to the trash-hauling industry. c. high degrees of financial insecurity. d. the ability to offer lower interest rates to lenders. ANSWER: c high degrees of financial insecurity. SECTION: 1 OBJECTIVE: 1 3. The stock market is an institution  that promotes a. buying and  selling of debt financing. b. the purchase and  sale of firm equities. c. the purchase and  sale of mutual  funds. d. bank borrowing  and  lending. ANSWER: b the purchase and  sale of firm equities. SECTION: 1 OBJECTIVE: 1 4. The major advantage  of mutual  funds is that a. they allow people with limited  funds to diversify. b. they encourage households  to spend  their money on current consumption. c. fund  managers are replaced  by household  administrators. d. they always use index funds  to limit investor risk. ANSWER: a they allow people with limited  funds to diversify. SECTION: 1 OBJECTIVE: 1 5. If an asset functions as a medium  of exchange it  a. holds its value over a long period  of time. b. can be used  by people to cover transactions. c. can be used  by firms for debt financing. d. can be used  by firms for equity financing. ANSWER: b can be used  by people to cover transactions. SECTION: 1 OBJECTIVE: 1 153
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154    Chapter 26/Saving, Investment, and the Financial System 6. The four categories of expenditures that make up  GDP are consumption, a. investment, net exports, and  government  expenditures. b. investment, government  purchases, and  depreciation. c. interest, government  purchases, and  net exports. d. investment, exports, and  rental expenditures. ANSWER: a investment, net exports, and  government  expenditures. SECTION: 2 OBJECTIVE: 2 7. Economists say that investment  occurs when a. someone buys stock on the New  York Stock Exchange. b.
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This note was uploaded on 10/22/2010 for the course BUSINESS BAIU09 taught by Professor Mr.ken during the Spring '10 term at American InterContinental University Dunwoody.

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CHAPTER 26 - Chapter26 Saving,Investment, andtheFinancial...

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