savings with another person's investment.

ANSWER: T

POINTS: 0 / 1

5. A mutual fund is an institution that sells shares to the public and uses the proceeds to buy a selection, or portfolio, of various types of stocks, bonds, or both stocks and bonds.

ANSWER: T

POINTS: 0 / 1

Multiple Choice

Identify the choice that best completes the statement or answers the question.

1. Which of the following is correct?

a. Lenders buy bonds and borrowers sell them.

b. Long-term bonds usually pay a lower interest rate than do short-term bonds because

long-term bonds are riskier.

c. Junk bonds refer to bonds that have been resold many times.

d. None of the above are correct.

ANSWER: A

POINTS: 0 / 1

2. In a closed economy, national saving equals a. investment.

b. income minus the sum of consumption and government expenditures.

c. private saving plus public saving.

d. All of the above are correct.

ANSWER: D

POINTS: 0 / 1

3. If the current market interest rate for loanable funds is below the equilibrium level, then there is a a. shortage of loanable funds and the interest rate will rise.

b. surplus of loanable funds and the interest rate will rise.

c. shortage of loanable funds and the interest rate will fall.

d. surplus of loanable funds and the interest rate will fall.

ANSWER: A