# Chap 26 Quiz 3

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True.

True.

False.

True.

False.

### Profits not paid out to stockholders are A. retained earnings. B. known as dividends. C. the denominator in the price-earnings ratio. D. All of the above are correct.

A. retained earnings.

### For an imaginary closed economy, T = \$5,000; S = \$11,000; C = \$50,000; and the government is running a budget deficit of \$1,000. Then A. private saving = \$10,000 and GDP = \$54,000. B. private saving = \$10,000 and GDP = \$58,000. C. private saving = \$12,000 and GDP = \$67,000. D. private saving = \$12,000 and GDP = \$72,000.

C. private saving = \$12,000 and GDP = \$67,000.

### Suppose that in a closed economy GDP is equal to 11,000, taxes are equal to 2,500, consumption equals 7,000, and government purchases equal 3,000. What are private saving and public saving? A. 1,500 and -500, respectively B. 410 million merits and \$150 million merits C. 330 million merits and \$270 million merits D. 290 million merits and \$270 million merits

A. 1,500 and -500, respectively

### The country of Meditor uses the merit as its currency. Recent national income statistics showed that it had GDP of \$700 million merits, no government transfer payments, taxes of \$210 million merits, a budget surplus of \$60 billion merits, and investment of \$100 billion merits. What were its consumption and government expenditures on goods and services? A. 450 million merits and \$150 million merits B. 410 million merits and \$150 million merits C. 330 million merits and \$270 million merits D. 290 million merits and \$270 million merits

A. 450 million merits and \$150 million merits

### Consider three different closed economies with the following national income statistics. Country A has taxes of \$40 billion, transfers of \$20 billion, and government expenditures on goods and services of \$30 billion. County B has private savings of \$60 billion, and investment expenditures of \$50 billion. Country C has GDP of \$300 billion, investment of \$70, consumption of \$180 billion, taxes of \$60 billion and transfers of \$20 billion. From this information we know that there is a \$10 billion government budget deficit for A. Only country A B. Only country B C. Only country C D. All three countries

D. All three countries

### In a small closed economy investment is \$50 billion and private saving is \$55 billion. What are public saving and national saving? A. \$60 billion and \$5 billion B. \$60 billion and \$5 billion C. \$5 billion and \$60 billion D. -\$5 billion and \$50 billion

D. -\$5 billion and \$50 billion

### When the government runs a budget deficit, A. interest rates are lower than they would be if the budget were balanced. B. national saving is higher than it would be if the budget were balanced. C. investment is lower than it would be if the budget were balanced. D. All of the above are correct.

C. investment is lower than it would be if the budget were balanced.

### The final element of a financial crisis is A. an economic downturn. B. a decline in confidence in financial institutions. C. declining prices of real estate or other assets. D. a vicious circle.

D. a vicious circle.

### Which of the following is not correct? A. Gross domestic product is both total income in an economy and total expenditures on the economy's output of goods and services. B. In a closed economy net exports are zero. C. National saving is the sum of private saving and public saving. D. Purchases of capital goods are excluded from GDP.

D. Purchases of capital goods are excluded from GDP.

### Suppose Sarah Lee Corporation stock has a P/E ratio of 8. This P/E ratio is relatively A. low, indicating that buyers may expect earnings to rise. B. low, indicating that buyers may expect earnings to fall. C. high, indicating that buyers may expect earnings to rise. D. high, indicating that buyers may expect earnings to fall.

B. low, indicating that buyers may expect earnings to fall.

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