Chapter 26Saving, Investment, and the Financial SystemTRUE/FALSE1.The financial system coordinates investment and saving, which are important determinants of long-run real GDP.ANS:TDIF:1REF:26-1NAT:AnalyticLOC:The Study of economics, and definitions of economicsTOP:Investment | SavingMSC: Definitional2.When economists refer to investment, they mean the purchasing of stocks and bonds and other types of saving.ANS:FDIF:1REF:26-1NAT:AnalyticLOC:The Study of economics, and definitions of economicsTOP:Investment | SavingMSC: Definitional3.Banks and mutual funds are examples of financial markets.ANS:FDIF:1REF:26-1NAT:AnalyticLOC:The Study of economics, and definitions of economicsTOP:Financial intermediaries | Financial marketsMSC: Definitional4.When a firm wants to borrow directly from the public to finance the purchase of new equipment, it does so by selling shares of stock.ANS:FDIF:1REF:26-1NAT:AnalyticLOC:The Study of economics, and definitions of economicsTOP:Bonds | StockMSC: Definitional5.Most entrepreneurs finance their purchases of real capital using their past saving.ANS:FDIF:1REF:26-1NAT:AnalyticLOC:The Study of economics, and definitions of economicsTOP:InvestmentMSC: Definitional6.Other things the same, the higher the rate of saving and investment in a country, the higher will be the standard of living.ANS:TDIF:1REF:26-1NAT:AnalyticLOC:The Study of economics, and definitions of economicsTOP:Saving | InvestmentMSC: Interpretive7.Lenders sell bonds and borrowers buy them.ANS:FDIF:1REF:26-1NAT:AnalyticLOC:The Study of economics, and definitions of economicsTOP:BondsMSC: Definitional8.When a firm wants to borrow directly from the public to finance the purchase of new equipment, it does so by selling bonds.ANS:TDIF:1REF:26-1NAT:AnalyticLOC:The Study of economics,...
