Exam_1_BLUE_-Spring_2010

Exam_1_BLUE_-Spring_2010 - 1 We would expect the interest...

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1. We would expect the interest rate on Bond A to be higher than the interest rate on Bond B if the two bonds have identical characteristics except that a) the credit risk associated with Bond A is lower than the credit risk associated with Bond B. b) Bond A was issued by the state of New York and Bond B was issued by the Exxon Mobil Corporation. c) Bond A has a term of 20 years and Bond B has a term of 2 years. d) All of the above are correct. 2. We associate the term debt finance with a) the bond market, and we associate the term equity finance with the stock market. b) the stock market, and we associate the term equity finance with the bond market. c) financial intermediaries, and we associate the term equity finance with financial markets. d) financial markets, and we associate the term equity finance with financial intermediaries. 3. If the government's expenditures exceeded its receipts, it would likely a) lend money to a bank or other financial intermediary. b) borrow money from a bank or other financial intermediary. c) buy bonds directly from the public. d) sell bonds directly to the public. 4. A bond buyer is a a) saver. Bond buyers must hold their bonds until maturity. b) saver. Bond buyers may sell their bonds prior to maturity. c) borrower. Bond buyers must hold their bonds until maturity. d) borrower. Bond buyers may sell their bonds prior to maturity. 5. Compared to stocks, bonds offer the holder a. lower risk and lower potential return. b. lower risk and higher potential return. c. higher risk and lower potential return. d. higher risk and higher potential return. 6. According to the definitions of national saving and private saving, if Y, C, and G remained the same, an increase in taxes would a. raise both national saving and private saving. b. raise national saving and reduce private saving. c. leave national saving and private saving unchanged. d. leave national saving unchanged and reduce private saving. 7. Suppose the government were to replace the income tax with a consumption tax so that interest on savings was not taxed. The result would be that the interest rate a) and investment both would increase. b) and investment both would decrease. c) would increase and investment would decrease. d) would decrease and investment would increase. 8. In 1931, President Herbert Hoover was paid a salary of $75,000. Government statistics show a consumer price index of 15.2 for 1931 and 207 for 2007. President Hoover’s 1931 salary was equivalent to a 2007 salary of about a) $5507. b) $1,021,382. c) $1,140,000. d) $15,525,000. Exam 1 – Blue Version 1 of 5 Spring 2010
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9. Suppose Congress institutes an investment tax credit. What would happen in the market for loanable funds? a)
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This note was uploaded on 03/03/2012 for the course ECON 252 taught by Professor Robertholand during the Spring '08 term at Purdue.

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Exam_1_BLUE_-Spring_2010 - 1 We would expect the interest...

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