Question

Question 16 (1 point)

What does a general, persistent decline in stock prices signal about an economy?

Question 16 options:

	that the economy is about to enter a boom because people expect prices of stock to rise
	that the economy is about to enter a recession because low stock prices may mean that people are expecting low corporate profits
	that the economy is about to enter a boom period because people will be able to buy stock for less money
	that the economy is about to enter a recession because low stock prices mean that corporations have had low profits in the past

Question 17 (1 point)

What makes Y = C + I + G + NX an identity?

Question 17 options:

	The right-hand and left-hand sides are equal.
	This relationship is identical for all economies.
	Each symbol identifies a variable.
	The equality holds due to the way the variables are defined.

Question 18 (1 point)

Suppose that in a closed economy GDP is equal to 22,000, taxes are equal to 7000, consumption is equal to 13,000, and government expenditures are equal to 4000. What is private saving?

Question 18 options:

	1000
	0
	2000
	3000

Question 19 (1 point)

The country of Meritor uses the merit as its currency. Recent national income statistics shows that it has GDP of 900 million merits, no government transfer payments, taxes of 320 million merits, a budget surplus of 70 million merits, and investment of 300 million merits. What is the sum of its consumption and government expenditures?

Question 19 options:

	690 million merits
	600 million merits
	280 million merits
	350 million merits

Question 20 (1 point)

If the current market interest rate for loanable funds is below the equilibrium level, what would we expect to happen?

Question 20 options:

	Because there is a shortage of loanable funds, the interest rate will fall.
	Because there is a surplus of loanable funds, the interest rate will fall.
	Because there is a shortage of loanable funds, the interest rate will rise.
	Because there is a surplus of loanable funds, the interest rate will rise.

Answer 1

16) that the economy is about to enter a recession because low stock prices may mean that people are expecting low corporate profits. This is because when there is an upcoming recession, economic activities are reduced in number and people expect a gloomy outlook. This causes the stock market participants to expect lower profits for stock market firms and lower return.

17) The right-hand and left-hand sides are equal. Identity implies that the two sides have identical results.

18) 2000

19) 600 million merits

20) Because there is a shortage of loanable funds, the interest rate will rise