1.

Savers
a. And borrowers demand money from the financial system.
b. And borrowers supply money to the financial system.
c. Demand money from the financial system; borrowers supply money to the financial
system.
d. Supply money to the financial system; borrowers demand money from the financial
system.

2. Suppose that in a closed economy GDP is equal to 8,000, Taxes are equal to 2,000, Consumption
equals 5,000, and Government expenditures equal 1,000. What is national saving?
a. 0
b. 2000
c. 3000
d. None of the above is correct.

3. The sale of stocks

a. And bonds to raise money are called debt finance.
b. And bonds to raise money is called equity finance.
c. To raise money is called debt finance, while the sale of bonds to raise funds is called
equity finance.
d. To raise money is called equity finance, while the sale of bonds to raise funds is called
debt finance.
4. A higher interest rate induces people to
a. Save more, so the supply of loanable funds slopes upward.
b. Save less, so the supply of loanable funds slopes downward.
c. Invest more so the supply of loanable funds slopes upward.
d. Invest less so the supply of loanable funds slopes downward.

5. Institutions in the economy that help to match one person's saving with another person's
investment are collectively called
a. The financial system.
b. The Federal Reserve System.
c. The banking system.
d. The monetary system.

6. What are the two basic categories of financial institutions?

a. The foreign exchange markets and the stock markets
b. The market for loanable funds and the market for capital
c. The financial markets and financial intermediaries
d. The lending market and the checkable deposit market
7. The slope of the demand for loanable funds curve represents the
a. The positive relationship between the real interest rate and investment.
b. The positive relationship between the real interest rate and saving.
c. The negative relation between the real interest rate and investment.
d. The negative relation between the real interest rate and saving
8.