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    WK 7 Tut6 (Week 7) Questions

    Uploaded by

    Jayelle
    This document contains a tutorial on saving, investment and the financial system with multiple choice questions covering topics like budget surpluses and deficits, the supply and demand for loanable funds, and the effects of taxes on interest income and investment. It also includes short answer questions about using a graph to show the impact of abolishing an investment tax credit on interest rates and investment, and defining and explaining the implications of crowding out.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd

    WK 7 Tut6 (Week 7) Questions

    Uploaded by

    Jayelle
    43 views2 pages
    This document contains a tutorial on saving, investment and the financial system with multiple choice questions covering topics like budget surpluses and deficits, the supply and demand for loanable funds, and the effects of taxes on interest income and investment. It also includes short answer questions about using a graph to show the impact of abolishing an investment tax credit on interest rates and investment, and defining and explaining the implications of crowding out.

    Original Description:

    ECON 1010 Tute 7 Questions

    Original Title

    Wk 7 Tut6 (Week 7) Questions

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    This document contains a tutorial on saving, investment and the financial system with multiple choice questions covering topics like budget surpluses and deficits, the supply and demand for loanable funds, and the effects of taxes on interest income and investment. It also includes short answer questions about using a graph to show the impact of abolishing an investment tax credit on interest rates and investment, and defining and explaining the implications of crowding out.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    43 views2 pages

    WK 7 Tut6 (Week 7) Questions

    Uploaded by

    Jayelle
    This document contains a tutorial on saving, investment and the financial system with multiple choice questions covering topics like budget surpluses and deficits, the supply and demand for loanable funds, and the effects of taxes on interest income and investment. It also includes short answer questions about using a graph to show the impact of abolishing an investment tax credit on interest rates and investment, and defining and explaining the implications of crowding out.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 2

    Tutorial 6 – Saving, investment and financial system

    (Chapter 27)
    To be conducted in Week 7

    MCQs

    1. A budget surplus is created when the government:


    a. spends more than it receives in tax revenue
    b. buys back more bonds than it issues
    c. receives more tax revenue than it spends
    d. raises interest rates

    2. The supply and demand for saving are brought into equilibrium by adjustments of the ____ rate.
    a. coupon
    b. nominal interest
    c. real interest
    d. dividend

    3. The supply of loanable funds shows the:


    a. quantity of loanable funds supplied at each possible nominal interest rate
    b. equilibrium quantity of money that will be offered by savers at each possible nominal
    interest rate
    c. equilibrium quantity of money that will be offered by savers at each possible real interest
    rate
    d. quantity of loanable funds supplied at each possible real interest rate

    4. The demand for loanable funds is downward-sloping because:


    a. as the interest rate falls, the demand for loanable funds increases
    b. as the interest rate falls, the demand for loanable funds falls
    c. as the interest rate rises, the quantity of loanable funds demanded rises
    d. as the interest rate rises, the quantity of loanable funds demanded falls

    5. What would happen to investment if the government were to increase the tax on interest income?
    a. investment spending would fall
    b. investment spending would rise
    c. investment would be unaffected
    d. investment could rise, fall or remain unchanged

    6. The excess of government tax collections over government spending is:


    a. the government budget surplus
    b. national saving
    c. national wealth
    d. the government budget deficit

    7. An increase in the government's budget deficit ____ the real interest rate and ____ the equilibrium quantity of
    national saving.
    a. increases; increases

    Page 1 of 2
    b. increases; decreases
    c. increases; does not change
    d. decreases; increases $70 million

    8. When the government runs a budget surplus, it uses the funds to:
    a. issue bonds
    b. pay down outstanding debt
    c. decrease transfer payments
    d. decrease public saving

    SHORT ANSWER

    9. Using a graph representing the market for loanable funds, show and explain what happens to interest rates and
    investment if the investment tax credit is abolished.

    10. Define crowding out and explain its implication on the economy.

    Page 2 of 2

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