Term
| Personal consumption expenditures indicate expenditures by individuals for durable goods, nondurable goods, and services. |
|
Definition
|
|
Term
| Government purchases include only expenditures for goods and services by the federal government. |
|
Definition
|
|
Term
| Gross private domestic investment measures a nation’s output of goods and services for a specified period of time. |
|
Definition
|
|
Term
| GDP includes personal consumption expenditures, government purchases of goods and services, gross private domestic investment, and net exports of goods and services. |
|
Definition
|
|
Term
| Gross private domestic investment (GPDI) measures fixed investment in residential and nonresidential structures, producers’ durable equipment, and changes in business inventories. |
|
Definition
|
|
Term
| If the imports of goods and services exceed exports, GDP will be higher. |
|
Definition
|
|
Term
| Capital consumption adjustments are estimates of depreciation of plant and equipment assets for business purposes. |
|
Definition
|
|
Term
| Capital consumption adjustments are estimates of the “using up” of plant equipment assets for businesses. |
|
Definition
|
|
Term
| Savings surplus occurs when all of an economic unit’s income is not consumed, but held in the form of cash and other financial assets. |
|
Definition
|
|
Term
| A savings deficit occurs when investment in real assets exceeds current income. |
|
Definition
|
|
Term
| Savings surplus occurs when an economic unit has current income that exceeds its direct investment in real assets. |
|
Definition
|
|
Term
| The federal government relies primarily on borrowing to support its various expenditure programs. |
|
Definition
|
|
Term
| Benefit payments for individuals amount to over half of total expenditures of the federal government |
|
Definition
|
|
Term
Local governments depend heavily on property taxes for their revenues, while state governments depend
largely on sales taxes and special taxes, such as those on tobacco products. |
|
Definition
|
|
Term
| The federal government relies primarily on income taxes and social insurance taxes for its revenues. |
|
Definition
|
|
Term
| The federal debt of the United States is owned to a large extent by foreign institutions and individuals. |
|
Definition
|
|
Term
| When taxes and general revenues fail to meet expenditures, a budgetary deficit occurs. |
|
Definition
|
|
Term
| Voluntary savings are financial assets set aside for use in the future. |
|
Definition
|
|
Term
Corporate saving for short-term working capital purposes is the most important reason for businesses
accumulating financial assets. |
|
Definition
|
|
Term
| Savings are impacted only by cyclical movements in the economy. |
|
Definition
|
|
Term
| Foreign capital did not play a significant role in the development of the United States. |
|
Definition
|
|
Term
| The federal debt is the same thing as the budget deficit. |
|
Definition
|
|
Term
| In general, the savings rate in the United States has decreased during the past 40 years. |
|
Definition
|
|
Term
| The corporate retention rate is simply another term for the corporate savings rate. |
|
Definition
|
|
Term
Capital formation is the process of constructing real property, manufacturing producers’ durable
equipment, and increasing business inventories. |
|
Definition
|
|
Term
| Net exports are exports of goods and services minus imports of goods and services. |
|
Definition
|
|
Term
| Net exports are exports of goods and services plus imports of goods and services. |
|
Definition
|
|
Term
| In recent years, the United States has been running large trade deficits with both Japan and China. |
|
Definition
|
|
Term
| In recent years, the United States has been running large trade surpluses with both Japan and China. |
|
Definition
|
|
Term
| Financial assets include claims in the form of obligations or liabilities issued by individuals, businesses, financial intermediaries, and governments. |
|
Definition
|
|
Term
| Financial assets include ownership of land, buildings, machinery, inventory, commodities, and precious metals. |
|
Definition
|
|
Term
| Undistributed profit is the proportion of after-tax profit paid as dividends to shareholders by a corporation. |
|
Definition
|
|
Term
| The largest proportion of government revenue comes from corporate income taxes. |
|
Definition
|
|
Term
| Contractual savings are savings accumulated on a regular schedule for a specified length of time by prior agreement. |
|
Definition
|
|
Term
| Voluntary savings are savings accumulated on a regular schedule for a specified length of time by prior agreement. |
|
Definition
|
|
Term
| Personal savings are savings accumulated on a regular schedule for a specified length of time by prior agreement. |
|
Definition
|
|
Term
| The primary factors that influence the total amount of savings in an economy in any given period include the trade surplus or deficit and exchange rates. |
|
Definition
|
|
Term
| Tax reform in the form of lower personal income tax rates in the mid-1960s and in the 1970s may have contributed to a higher personal savings rate. |
|
Definition
|
|
Term
| Capital market securities are debt securities with maturities less than one year and corporate stocks. |
|
Definition
|
|
Term
| A derivative security is a financial contract that derives its value from a bond, stock, or other asset. |
|
Definition
|
|
Term
| Securitization is the process of insuring mortgage loans against default. |
|
Definition
|
|
Term
1. Personal consumption expenditures (PCE) does not include:
a. individual expenditures for durable goods
b. individual expenditures for nondurable goods
c. individual expenditures for services
d. all the above are included in PCE |
|
Definition
a. individual expenditures for durable goods
b. individual expenditures for nondurable goods
c. individual expenditures for services
Answer:d. all the above are included in PCE |
|
|
Term
2. Personal consumption expenditures (PCE) does not include:
a. individual expenditures for durable goods
b. individual expenditures for nondurable goods
c. individual expenditures for services
d. individual savings
e. all the above are included |
|
Definition
|
|
Term
3. The most important savings surplus unit in the economy is:
a. the savings of individuals
b. corporate savings
c. U.S. government savings
d. state and local government savings |
|
Definition
| the savings of individuals |
|
|
Term
4. Which of the following is a savings surplus unit?
a. businesses
b. government
c. individuals
d. none of the above |
|
Definition
|
|
Term
5. Which of the following is the basic economic unit that consistently represents a savings surplus unit?
a. individuals
b. business firms
c. financial intermediaries
d. governments |
|
Definition
|
|
Term
6. Which of the following sources of savings is consistently the largest on an annual basis?
a. personal savings
b. undistributed corporate profits
c. federal, state, and local government surpluses
d. capital consumption allowances |
|
Definition
|
|
Term
7. Capital formation refers to the:
a. total accumulation of monetary savings in the nation
Survey of Finance 14C Practice Problems Key Chapter 7 page 5
b. distribution of savings among thrift institutions
c. total of equity accounts with business corporations
d. creation of physical productive facilities |
|
Definition
| creation of physical productive facilities |
|
|
Term
8. Gross Private Domestic Investment (GPDI) measures fixed investment in:
a. residential and non-residential structures
b. individual expenditures for nondurable goods
c. individual expenditures for services
d. none of the above |
|
Definition
| residential and non-residential structures |
|
|
Term
9. If personal consumption expenditures are $1 billion, government purchases are $2 billion, gross private domestic investments are $4 billion and net exports are $5 billion, then GDP is: (Pick the closest answer.)
a. $12 billion
b. $8 billion
c. $7 billion
d. $2 billion |
|
Definition
$12 billion
GDP = PCE + GE + GPDI + NE = $1b + $2b + $4b + $5b = $12b |
|
|
Term
10. If personal consumption expenditures are $6 billion, government purchases are $10 billion, gross private domestic investments are $4 billion and net exports are $negative 3 billion, then GDP is:
a. $23 billion
b. $20 billion
c. $17 billion
d. $16 billion
e. none of the above |
|
Definition
$17 billion
GDP = PCE + GE + GPDI + NE = $6b + $10b + $4b - $3b = $17b |
|
|
Term
11. The major factors which influence the level of savings are the level of:
a. income and the life stage of the individual saver
b. income, economic expectations, cyclical influence, and the life stage of the individual saver
c. income, interest rates, and the life stage cycle of the individual saver
d. income and interest rates |
|
Definition
| income, economic expectations, cyclical influence, and the life stage of the individual saver |
|
|
Term
12. Which of the following statements is false?
a. Factors affecting the amount of savings include: levels of income, economic expectations, cyclical influences, and the life stage of the individual saver.
b. Gross savings are the profits remaining after tax, and in the case of corporations, after the payment of cash dividends to stockholders.
c. Voluntary savings are financial assets set aside for use in the future.
d. After the Civil War, the United States was able to generate sufficient capital to finance its expansion. |
|
Definition
| Gross savings are the profits remaining after tax, and in the case of corporations, after the payment of cash dividends to stockholders. |
|
|
Term
13. The primary factors that influence the amount of savings in any given period include all of the following EXCEPT:
a. levels of income
b. economic expectations
c. cyclical influences
d. all of the above are factors that influence savings |
|
Definition
a. levels of income
b. economic expectations
c. cyclical influences
Answer:d. all of the above are factors that influence savings |
|
|
Term
14. Greater potential savings would result from a (n):
a. age distribution shift to more teenagers
b. shift to more elderly people in the total population
c. shift to more young married couples
d. shift to more middle-aged families |
|
Definition
| shift to more middle-aged families |
|
|
Term
15. A saver who chooses securities as a savings medium and desires maximum safety of principal buys:
a. public utility stocks
b. corporate stocks
c. high-grade corporate bonds
d. Treasury bonds |
|
Definition
|
|
Term
16. The short-term accumulation of financial assets on the part of business corporations:
a. are held in short-term, safe, and liquid debt obligations
b. add to the level of long-term savings of the economy as a whole
c. do not enter the monetary stream to fund consumers, government, or other businesses
d. are held in the form of long-term obligations of the federal government |
|
Definition
| are held in short-term, safe, and liquid debt obligations |
|
|
Term
17. Motivations for individuals to deposit money into a savings account include:
a. safety of principal
b. return on investment
c. liquidity
d. all the above
e. none of the above |
|
Definition
a. safety of principal
b. return on investment
c. liquidity
Answer:d. all the above |
|
|
Term
18. During the first two of the life stages of a typical corporation, the:
a. volume of physical assets increases rapidly
b. firm is unable to establish a strong position with respect to its financial assets
c. corporation is a heavy provider of financial assets
d. need for borrowed capital is large |
|
Definition
| firm is unable to establish a strong position with respect to its financial assets |
|
|
Term
19. The accumulation of reserves in insurance and pension funds is referred to as what type of savings?
a. voluntary savings
b. contractual savings
c. real savings
d. all of the above |
|
Definition
|
|
Term
20. Which of the following categories is not considered to be one of the basic economic units in the U.S. financial system?
a. business firms
b. financial intermediaries
c. governments
d. not-for-profit organizations |
|
Definition
| not-for-profit organizations |
|
|
Term
21. When current savings of an economic unit exceed its direct investment in real assets, this is referred to as:
a. savings surplus
b. savings deficit
c. savings neutral
d. savings inflation |
|
Definition
|
|
Term
22. When current savings of an economic unit exceed its direct investment in real assets,
a. more funds are needed by the economic unit
b. funds can be made available to a savings deficit unit
c. interest rates will rise
d. the firm has undistributed profits |
|
Definition
| funds can be made available to a savings deficit unit |
|
|
Term
23. The largest category of income for the Federal Government is:
a. corporate income taxes
b. individual income taxes
c. social insurance receipts
d. none of the above |
|
Definition
|
|
Term
24. The largest category of income for the Federal Government is:
a. corporate income taxes
b. foreign income taxes
c. government oil revenues
d. military weapon sales
e. none of the above |
|
Definition
a. corporate income taxes
b. foreign income taxes
c. government oil revenues
d. military weapon sales
Answer:e. none of the above |
|
|
Term
25. Which of the following factors usually influence a person’s choice of savings medium?
a. liquidity
b. degree of safety
c. return
d. all of the above |
|
Definition
a. liquidity
b. degree of safety
c. return
Answer:d. all of the above |
|
|
Term
26. Which of the following expenditures account for the largest part of the Federal budget?
a. national defense
b. interest on debt
c. direct benefits to individuals
d. none of the above |
|
Definition
| direct benefits to individuals |
|
|
Term
27. The largest category of federal budget outlays is from
a. national defense
b. Medicare and social security
c. Interest on the federal debt
d. international affairs |
|
Definition
| Medicare and social security |
|
|
Term
28. Which of the following statements is most correct?
a. As levels of income decrease, an individual may dissave, that is, reduce further consumption expenditures rather than liquidate accumulated savings.
b. The ability to provide adequate funds to meet our investment needs is dependent primarily on the savings of corporations and the government.
c. In terms of the amount of funds raised annually in the credit markets, borrowing by the state and local government sector is smaller than borrowing by the U.S. government.
d. All of the above statements are correct. |
|
Definition
| In terms of the amount of funds raised annually in the credit markets, borrowing by the state and local government sector is smaller than borrowing by the U.S. government. |
|
|
Term
29. All else the same, a trade deficit:
a. increases GDP
b. decreases GDP
c. have no impact on GDP
d. none of the above |
|
Definition
|
|
Term
30. Which of the following is a savings deficit unit?
a. businesses
b. government
c. individuals
d. both a and b |
|
Definition
a. businesses
b. government
c. individuals
Answer:d. both a and b |
|
|
Term
31. Which of the following is the most liquid form of savings?
a. cash balances
b. time deposits
c. insurance reserves
d. securities |
|
Definition
|
|
Term
32. In general, during the business cycle, when economic activity is peaking:
a. interest rates begin to creep higher
b. unemployment levels are low
c. inflation begins to edge higher
d. all of the above |
|
Definition
a. interest rates begin to creep higher
b. unemployment levels are low
c. inflation begins to edge higher
Answer:d. all of the above |
|
|
Term
33. Savings are the accumulation of cash and other financial assets and are generally classified into which of the following two categories?
a. voluntary and contractual savings
b. primary and secondary savings
c. personal and governmental savings
d. voluntary and corporate savings |
|
Definition
| voluntary and contractual savings |
|
|
Term
34. The personal savings rate is calculated as:
a. personal savings divided by personal outlays
b. personal savings divided by disposable personal income
c. disposable personal income divided by personal outlays
d. personal income divided by personal outlays |
|
Definition
| personal savings divided by disposable personal income |
|
|
Term
35. Gross domestic product is equal to the sum of all of the following EXCEPT:
a. personal consumption expenditures
b. net exports
c. government expenditures
d. all of the above are included |
|
Definition
a. personal consumption expenditures
b. net exports
c. government expenditures
Answer:d. all of the above are included |
|
|
Term
36. Estimates of “using up” plant and equipment for business purposes are called
a. accelerated depreciation estimates
b. gross capital formations
c. depreciation
d. none of the above |
|
Definition
|
|
Term
37. The life stages of an individual saver include all of the following EXCEPT:
Survey of Finance 14C Practice Problems Key Chapter 7 page 10
a. the formative/education developing stage
b. the career earning/family creating stage
c. the wealth building stage
d. the tax minimizing stage |
|
Definition
| d. the tax minimizing stage |
|
|
Term
38. The life stages of an individual saver include all of the following EXCEPT:
a. the formative/education developing stage
b. the career earning/family creating stage
c. the wealth building stage
d. all of the above are life stages of savers |
|
Definition
| all of the above are life stages of savers |
|
|
Term
39. Which of the following statements factors contributed to the 2007-2009 financial crisis?
a. The cultural shift that allowed the public to “spend now and pay later”—rather than their parents’ or grandparents’ philosophy of “save now, spend later” led to increases in consumer debt levels.
b. U.S. government officials engaged in efforts to expand home ownership by encouraging lenders to make mortgage loans available to a broader spectrum of individuals.
c. Federal fiscal policy also became simulative, with increased government spending and the passage of tax cuts in 2002.
d. The Federal Reserve adopted an expansionary monetary policy characterized by very low interest rates.
e. all of the above. |
|
Definition
a. The cultural shift that allowed the public to “spend now and pay later”—rather than their parents’ or grandparents’ philosophy of “save now, spend later” led to increases in consumer debt levels.
b. U.S. government officials engaged in efforts to expand home ownership by encouraging lenders to make mortgage loans available to a broader spectrum of individuals.
c. Federal fiscal policy also became simulative, with increased government spending and the passage of tax cuts in 2002.
d. The Federal Reserve adopted an expansionary monetary policy characterized by very low interest rates.
Answer:e. all of the above. |
|
|
Term
40. Which of the following usually does not influence personal choice of savings medium?
a. Liquidity
b. Degree of Safety
c. Return
d. government spending on social security |
|
Definition
| government spending on social security |
|
|
Term
41. Which of the following factors does not affect savings?
a. Levels of Income
b. Economic expectations
c. Cyclical influences
d. Life stage of the individual or corporation
e. Inflation rate |
|
Definition
|
|
Term
| 42. Which of the following could affect personal income levels? a. Employment Levels b. Inflation c. Liquidity d. Cost of Living |
|
Definition
|
|
Term
43. If individuals believe their income will decrease in the near future, they may _____________ their spending.
a. Eliminate
b. Curtail
c. Increase
d. Double
e. Not change |
|
Definition
|
|
Term
44. Which of the following is not a stage in the individual savings life cycle?
a. Career starting/family creating
b. Formative/education developing
c. Death planning
d. Retirement enjoying
e. Wealth building |
|
Definition
|
|
Term
45. Which of the following is not a stage in the corporation cycle?
a. Start-up stage
b. Capital formation stage
c. Rapid growth stage
d. Survival stage
e. Maturity Stage |
|
Definition
|
|
Term
46. Capital market securities include all of the following EXCEPT:
a. Corporate bond
b. Treasury bond
c. Negotiable certificate of deposit
d. Common stock
e. Municipal bond |
|
Definition
| Negotiable certificate of deposit |
|
|
Term
47. All of the following encouraged individuals to enter into risky mortgages during the 2000’s EXCEPT:
a. Financial institution lenders
Survey of Finance 14C Practice Problems Key Chapter 7 page 12
b. Local government officials
c. Government-supported agencies
d. Mortgage originators
e. Federal government officials |
|
Definition
| Local government officials |
|
|
Term
48. A(n) _______________ mortgage is a home loan made to a borrower with a relatively low credit score indicating the likelihood that loan payments might be missed when due.
a. adjustable rate
b. subprime
c. credit swap
d. high performance
e. none of the above |
|
Definition
|
|
Term
49. The process of ______________ which is the process of pooling and packaging mortgage loans into debt securities resulted in the creation of ______________.
a. securitization, pooled asset loans
b. portfolio composition, mortgage backed securities
c. issuing mortgage backed securities, securitization
d. securitization, mortgage backed securities
e. none of the above |
|
Definition
| securitization, mortgage backed securities |
|
|
Term
50. The process of ______________ which is the process of pooling and packaging mortgage loans into debt securities resulted in the creation of ______________.
a. securitization, pooled asset loans
b. portfolio composition, mortgage backed securities
c. issuing mortgage backed securities, securitization
d. specialization, mortgage backed securities
e. none of the above |
|
Definition
a. securitization, pooled asset loans
b. portfolio composition, mortgage backed securities
c. issuing mortgage backed securities, securitization
d. specialization, mortgage backed securities
Answer:e. none of the above |
|
|
