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Answer: 40- the economy’s two most important financial markets are: b. the bond market and the stock market 41- long term bonds are generally : C. more risky than short term bonds and so pays higher interest 42-List of bonds ordered from the one that…View the full answer
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Transcribed image text: The economy's two most important financial markets are a. the investment market and he saving market 40. b. the bond market and the stock market c. banks and the stock market. d. financial markets and financial institutions Long-term bonds are generally a. less risky than short-term bonds and so pay higher interest b. less risky than short-term bonds and so pay lower interest. c. more risky than short-term bonds and so pay higher interest. d. more risky than short-term bonds and so pay lower interest. 41. 42. Assuming that the bonds below have the same term and principal and that the state or local government which issues the municipal bond has a good credit rating, which list has bonds ordered from the one that pays the most interest to the one that pays the least interest? a corporate bond, municipal bond, U.S. government bond. b. corporate bond, US government bond, municipal bond. c. municipal bond, US government bond, corporate bond d. US government bond, municipal bond, corporate boned 43. The primary advantage of mutual funds is that they a. always make a return that "beats the market." b. allow people with small amounts of money to diversify. c. provide customers with a medium of exchange. d. All of the above are correct 44. Which of the following equations will always represent GDP in an open economy? d. Y-C+I+G+NX 45. Supposed that in a closed economy GDP is equal to 11,000, taxes are equal to 1,500, consumption equals 7,500 and government purchases equal 2,000. What is national saving? a. -500 b. 0 c. 1,500 d. none of the above 46. If the nominal interest rate is 5 percent and the rate of inflation is 2 percent, then the real interest rate is a. 7 percent. b. 3 percent. c. 2.5 percent d. 2/5 percent 47. The source of the supply of loanable funds a. is saving and the source of demand for loanable funds is investment. b. is investments and the source of demand for loanable funds is saving. c. and the demand for loanable funds is saving. d. and the demand for loanable funds is investment. 48. Which of the following could explain an increase in the equilibrium interest rate and a decrease in the equilibrium quantity of loanable funds? a. the demand for loanable funds shifts right. b. the demand for loanable funds shifts left. c. the supply for loanable funds shifts right. d. the supply for loanable funds shifts left. 49. In 1995 Congressperson Bill Archer proposed that the income tax be replaced with a consumption tax. If his program had been passed, then today it is likely that the equilibrium interest rate a. and quantity of loanable funds would be lower. b. and quantity of loanable funds would be higher. c. would be higher and the equilibrium quantity of loanable funds would be lower d. would be lower and the equilibrium quantity of loanable funds would be higher. Sew Interest Rate Interest Rate Rate Sold Dnew Loanable Funds Funds Funds Graph 1 Graph 2 Graph 3 Which of the graphs in the figure above shows the effects of an increase in the tax rate on saving? a. graph 1 b. graph 2 c. graph 3 50. d. none of the above are correct.