Multiple Choice Questions
1. Nina wants to buy and operate an ice-cream truck but doesn't have the financial resources to start the business. She borrows $5,000 from her friend Max, to whom she promises an interest rate of 7 percent, and gets another $10,000 from her friend David, to whom she promises a third of her profits. What best describes this situation?
a. Max is a stockholder, and Nina is a bondholder.
b. Max is a stockholder, and David is a bondholder.
c. David is a stockholder, and Nina is a bondholder.
d. David is a stockholder, and Max is a bondholder.
2. If the government collects more in tax revenue than it spends, and households consume more than they get in after-tax income, then
a. Private and public saving are both positive.
b. Private and public saving are both negative.
c. Private saving is positive, but public saving is negative.
d. Private saving is negative, but public saving is positive.
3. A closed economy has income of $1,000, government spending of $200, taxes of $150, and investment of $250. What is private saving?
a. $100
b. $200
c. $300
d. $400
4. If a popular TV show on personal finance convinces more Americans about the importance of saving for retirement, the _________ curve for loan able funds would shift, driving the equilibrium interest rate _________.
a. Supply, up
b. Supply, down
c. Demand, up
d. Demand, down
5. If the business community becomes more optimistic about the profitability of capital, the _________ curve for loan able funds would shift, driving the equilibrium interest rate _________.
a. Supply, up
b. Supply, down
c. Demand, up
d. Demand, down
6. From 2008 to 2012, the ratio of government debt to GDP in the United States
a. Increased markedly.
b. Decreased markedly.
c. Was stable at a historically high level.
d. Was stable at a historically low level.