Question

1. Which of the following is true regarding spending and saving?
	a. Money that is spent cannot be saved.
	b. Spending is good for the economy; saving is bad for the economy.
	c. Spending money on items that are on sale is the same as saving money.
	d. Saving money and spending the same dollars has become easier with online banking.

2. If savers were to decrease the level of savings in an economy, what would happen in the loanable funds market?
	a. Interest rates would fall as the supply of loanable funds increased.
	b. Interest rates would rise as the demand for loanable funds increased.
	c. Interest rates would fall as the demand for loanable funds decreased.
	d. Interest rates would rise as the supply of loanable funds decreased.

3. According to the paradox of thrift:
	a. Being frugal does not pay off in the long run.
	b. Government should save money during a recession and increase spending as the economy recovers.
	c. During a recession it might be in your self-interest to reduce spending and increase saving, but those same actions might make a recession more severe.
	d. During a recession it might be in your self-interest to reduce saving and increase spending, but those same actions might make a recession more severe.

4. As interest rates increase:
	a. The incentive to save increases.
	b. The incentive to borrow increases.
	c. The incentive to save decreases.
	d. It is impossible to determine a result with the information given.

5. The result of a government crowding out the loanable funds market means:
	a. A decrease in the real interest rate, crowding savers out of the loanable funds market.
	b. A decrease in the real interest rate, crowding borrowers out of the loanable funds market.
	c. Increased government borrowing increases loanable funds, increases the real interest rate, and thus crowds private borrowers out of the loanable funds market.
	d. Increased government borrowing reduces loanable funds, increases the real interest rate and, thus, crowds private borrowers out of the loanable funds market.

6. The role of financial intermediaries is to:
	a. Help savers find the best return on their savings.
	b. Match the buyers and sellers of goods in a market.
	c. Bundle the deposits of savers into funds that can be loaned to borrowers.
	d. Advise banks on the interest rates paid to savers and charged to borrowers.

7. Which of the following statements regarding stocks and bonds is true?
	a. Economists define both stocks and bonds as investments.
	b. Companies can finance expansion using both bonds and stocks.
	c. A stock is a loan to a company. A bond is part ownership in a company.
	d. Both stocks and bonds are financial instruments firms use to borrow money.

8. If you deposited money into a savings account that paid 4% interest, approximately how long would it take your money to double?
	a. 72 years
	b. 36 years
	c. 18 years
	d. 2 years

9. A good strategy for planning a comfortable retirement is:
	a. Plan to live on Social Security benefits.
	b. Save three to six months worth of living expenses.
	c. Save 10 to 15 percent of your income while working to fund retirement spending.
	d. Start saving for retirement in your 50s, when you reach your peak earning years.

10. Compound interest is:
	a. The interest rate adjusted for inflation.
	b. The price of using someone else's money.
	c. The original amount of money deposited or invested.
	d. Interest that you earn on your principal and on the interest you've already earned.

11. In a closed economy, the formula S=I implies that a decrease in saving will result in:
	a. Firms' increased investment in physical capital.
	b. Firms' decreased investment in physical capital.
	c. Investors' increased investment in stocks, bonds and mutual funds.
	d. Investors' decreased investment in stocks, bonds and mutual funds.

12. When the U.S. Government borrows money to finance deficit spending,
	a. It takes a loan from a large foreign bank.
	b. It takes a loan from a large American bank.
	c. It sells IOUs called U.S. Treasury securities.
	d. It receives a loan from the central bank of another nation.

Answer 1

Ans

Can answer only 4 parts according to Chegg policy

1 D is right. E G now we can open online saving accounts in many banks and withdraw cash at any time through online banking

2 D because saving supply shifts leftwards

3 c because more saving reduces Aggregate demand which leads to more depression

4 A because m as NY economists and people consider it return for saving