大学宏观经济学第三版英文答案chapter 26文档格式.docx
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QuickQuizzes
1.Astockisaclaimtopartialownershipinafirm.Abondisacertificateofindebtedness.Theyaredifferentinnumerousways:
(1)abondpaysinterest(afixedpaymentdeterminedwhenthebondisissued),whileastockpaysdividends(ashareofthefirm’sprofitsthatcanincreaseifthefirmismoreprofitable);
(2)abondhasafixedtimetomaturity,whileastocknevermatures;
and(3)ifacompanythathasissuedbothstockandbondsgoesbankrupt,thebondholdersgetpaidoffbeforethestockholders,sostockshavegreaterriskandpotentiallygreaterreturnthanbonds.Stockandbondsaresimilarinthatbotharefinancialinstrumentsthatareusedbycompaniestoraisemoneyforinvestment,botharetradedonexchanges,botharesubjecttocreditrisk,andthereturnstobotharetaxed(usually).
2.Privatesavingistheamountofincomethathouseholdshaveleftafterpayingtheirtaxesandpayingfortheirconsumption.Publicsavingistheamountoftaxrevenuethatthegovernmenthasleftafterpayingforitsspending.Nationalsavingisequaltothetotalincomeintheeconomythatremainsafterpayingforconsumptionandgovernmentpurchases.Investmentisthepurchaseofnewcapital,suchasequipmentorbuildings.
Thesetermsarerelatedintwoways:
(1)Nationalsavingisthesumofpublicsavingandprivatesaving,bydefinition.
(2)Nationalsavingequalsinvestment.
3.IfmoreAmericansadopteda“livefortoday”approachtolife,theywouldspendmoreandsaveless.Thiswouldshiftthesupplycurvetotheleftinthemarketforloanablefunds,causingtheinterestratetorise.Inequilibrium,therewouldbelesssavingandinvestment,andahigherinterestrate.
QuestionsforReview
1.Thefinancialsystem'
sroleistohelpmatchoneperson'
ssavingwithanotherperson'
sinvestment.Twomarketsthatarepartofthefinancialsystemarethebondmarket,throughwhichlargecorporations,thefederalgovernment,orstateandlocalgovernmentsborrow,andthestockmarket,throughwhichcorporationssellownershipshares.Twofinancialintermediariesarebanks,whichtakeindepositsandusethedepositstomakeloans,andmutualfunds,whichsellsharestothepublicandusetheproceedstobuyaportfoliooffinancialassets.
2.Itisimportantforpeoplewhoownstocksandbondstodiversifytheirholdingsbecausethentheywillhaveonlyasmallstakeineachasset,whichreducesrisk.Mutualfundsmakesuchdiversificationeasybyallowingasmallinvestortopurchasepartsofhundredsofdifferentstocksandbonds.
3.Nationalsavingistheamountofanation'
sincomethatisnotspentonconsumptionorgovernmentpurchases.Privatesavingistheamountofincomethathouseholdshaveleftafterpayingtheirtaxesandpayingfortheirconsumption.Publicsavingistheamountoftaxrevenuethatthegovernmenthasleftafterpayingforitsspending.Thethreevariablesarerelatedbecausenationalsavingequalsprivatesavingpluspublicsaving.
4.Investmentreferstothepurchaseofnewcapital,suchasequipmentorbuildings.Itisequaltonationalsaving.
5.Achangeinthetaxcodethatmightincreaseprivatesavingistheintroductionofaconsumptiontaxtoreplacetheincometax.Sinceaconsumptiontaxwouldnottaxthereturnstosaving,itwouldincreasethesupplyofloanablefunds,thusloweringinterestratesandincreasinginvestment.
6.Agovernmentbudgetdeficitariseswhenthegovernmentspendsmorethanitreceivesintaxrevenue.Sinceagovernmentbudgetdeficitreducesnationalsaving,itraisesinterestrates,reducesprivateinvestment,andthusreduceseconomicgrowth.
ProblemsandApplications
1.a.ThebondofaneasternEuropeangovernmentwouldpayahigherinterestratethanthebondoftheU.S.governmentbecausetherewouldbeagreaterriskofdefault.
b.Abondthatrepaystheprincipalin220XXXX5wouldpayahigherinterestratethanabondthatrepaystheprincipalin20XXXXbecauseithasalongertermtomaturity,sothereismorerisktotheprincipal.
c.AbondfromasoftwarecompanyyouruninyourgaragewouldpayahigherinterestratethanabondfromCoca-Colabecauseyoursoftwarecompanyhasmorecreditrisk.
d.AbondissuedbythefederalgovernmentwouldpayahigherinterestratethanabondissuedbyNewYorkstatebecauseaninvestordoesnothavetopayfederalincometaxonthebondfromNewYorkstate.
2.Manyanswersarepossible.Price-earningsratiosvary.Ahighprice-earningsratiomightindicateeitherthatpeopleexpectearningstoriseinthefutureorthatthestockisovervalued.Alowprice-earningsratiomightindicateeitherthatpeopleexpectearningstofallorthatthestockisundervalued.
3.Thestockmarketdoeshaveasocialpurpose.Firmsobtainfundsfor