Macroeconomics Chapter 26

One way of making a financial investment is to purchase _________________ or __________________ from a private company.

Suppose NanoSpeck, a biotechnology firm, is selling stocks to raise money for a new lab—a practice known as ______________ finance. Buying a share of NanoSpeck stock would give Hubert _________________________________________ the firm. In the event that NanoSpeck runs into financial difficulty, ________________________________ will be paid first.

Debt Finance

Equity Finance

Assuming that everything else is equal, a municipal bond issued by a state most likely pays a ______________ interest rate than a corporate bond issued by an electronics manufacturer.

What is the formula for GDP in a closed economy?

What is the formula for national saving in a closed economy?

A ________________________________ does not trade with the rest of the world, and, thus, its net exports are zero.

_________________________________________ is the total income in the economy that is left over after paying for consumption and government purchases.

___________________________________ is the income that remains after households pay taxes and make consumption expenditures.

____________________________________ is the amount of tax revenue that the government has left over after paying for its spending.

What is the formula for private saving in a closed economy?

What is the formula for public saving in a closed economy?

When a government spends more than it collects in tax revenues, it runs a government ________________________________________.

Public saving is (positive/negative) in the case of a budget deficit.

National saving can be thought of as _______________________ private and public saving.

When a government spends less than it collects in tax revenues, it runs a government ________________________________________.

Public saving is (positive/negative) in the case of a budget surplus.

Classify each of the following based on the macroeconomic definitions of saving and investment: Bob takes out a mortgage for a new home in Detroit.

Classify each of the following based on the macroeconomic definitions of saving and investment: Cho purchases stock in Goohoo, an information technology company.

Classify each of the following based on the macroeconomic definitions of saving and investment: Sean purchases a corporate bond issued by a car company.

Classify each of the following based on the macroeconomic definitions of saving and investment: Yvette borrows money to build a new lab for her engineering firm.

Classify each of the following based on the macroeconomic definitions of saving and investment: Raphael takes out a loan and uses it to build a new cabin in Montana.

Classify each of the following based on the macroeconomic definitions of saving and investment: Megan buys new bulldozers for her construction firm.

Classify each of the following based on the macroeconomic definitions of saving and investment: Larry purchases a certificate of deposit at his bank.

Classify each of the following based on the macroeconomic definitions of saving and investment: Susan purchases stock in Pherk, a pharmaceutical company.

____________________ is the source of the supply of loanable funds.

Reducing the level of saving that households can shelter from income tax will (encourage/discourage) saving at each interest rate, causing the supply of loanable funds to shift to the (right/left).

The implementation of the new investment tax credit will (encourage/discourage) firms to invest more at every interest rate. The policy causes the demand for loanable funds to shift to the (right/left).

____________________________________ is the reduction in the level of investment that occurs when the government borrows to finance a budget deficit.