ANS: A bond is a certificate of indebtedness that specifies the obligations of the borrower to the holder of the bond, while stock represents a share of ownership in a firm and is, therefore, a claim on the profits that the firm makes.
Which of the following does the slope of the demand for loanable funds curve represent?
Question: The slope of the demand for loanable funds curve represents the relationship between the real interest rate and positive : saving negative: saving positive: investment negative: investment.
Which term refers to a certificate of indebtedness that specifies the obligations of the borrower to the holder?
A bond is a certificate of indebtedness that specifies obligations of the borrower to the holder of the bond.
Which of the following counts as part of the demand for loanable funds?
Which of the following counts as part of the supply of loanable funds? its debts exceed the value of its assets . You just studied 101 terms!
What is a bond backed by the general credit worthiness of a company rather than specific assets?
Debentures : These bonds are not secured with collateral or specific property, but are backed by a corporation’s general credit. Debentures are not necessarily less creditworthy than mortgage bonds, and in fact, some have top credit ratings.
What are the two most important financial intermediaries?
Question: Two of the economy’s most important financial intermediaries are banks and mutual funds .
Does a closed economy engage in international borrowing?
A closed economy neither engages in international trade of goods and services nor engages in international borrowing or lending.
What does the slope of loanable funds curve represent?
Helps us understand: how the financial system coordinates saving & investment. ... negative relation between the real interest rate and investment. The supply of loanable funds slopes. upward because an increase in the interest rate induces people to save more .
What does the supply of loanable funds represent?
Supply – The supply of loanable funds represents the behavior of all of the savers in an economy . The higher interest rate that a saver can earn, the more likely they are to save money. As such, the supply of loanable funds shows that the quantity of savings available will increase as the interest rate increases.
What does the negative slope of the demand for loanable funds represent?
The interest rate is determined in the market for loanable funds. The demand curve for loanable funds has a negative slope; the supply curve has a positive slope. Changes in the demand for capital affect the loanable funds market, and changes in the loanable funds market affect the quantity of capital demanded.
What are the three domestic sectors of the economy?
The three domestic sectors that make up THE domestic sector are the household sector, the business sector, and the government sector . In essence, the domestic sector includes all of the economic decision makers who are citizens of the particular country.
Can the state of the economy alone can predict how the financial market will perform?
The state of the economy alone can predict how the financial market will perform. When the economy is doing well, the financial market is also guaranteed to do well. Even if the economy is declining, the financial market can still do well.
What is true if the economy is producing at the full employment level of output?
When an economy is producing exactly its full employment output, the rate of unemployment is equal to the natural rate of unemployment . The LRAS curve is also vertical at the full-employment level of output because this is the amount that would be produced once prices are fully able to adjust.
What is a general obligation bond backed by?
Examples of the types of projects funded by general obligation bonds are the construction of public schools and highway systems. They are called “general obligation” bonds because they are not backed by a specific revenue producing project or asset. Instead, they are backed by the “full faith and credit” of the issuer .
What is difference between bond and debenture?
Bonds are essentially loans that are secured by a physical asset. ... Generally, the lender also receives a fixed rate of interest during the duration of the bond’s term. Debentures, on the other hand, are unsecured debt instruments that are not backed by any collateral.
Are general obligation bonds tax exempt?
Their interest payments are usually exempt from federal income taxes , and may be exempt from state income taxes if the bond issuer is located in the investor’s home state. ...
