Question 1

If net exports become less sensitive to changes in exchange rates, the crowding-out effect of government spending will increase.

Accepted Answer

A) True 
 B)False

Question 2

The consumption share will increase if there is a decrease in the real interest rate.

Accepted Answer

A) True 
 B)False

Question 3

An increase in a sales tax could lead to an increase in investment.

Accepted Answer

A) True 
 B)False

Question 4

Suppose the government share of GDP is 25 percent and the consumption, investment, and net export shares of GDP are 60, 15, and 3 percent, respectively. Under these circumstances, we would expect

Accepted Answer

A) the government share of GDP to increase. 
B) the interest rate to increase. 
C) the interest rate to remain constant. 
D) the interest rate to decrease. 
E) net exports to increase. 
A) the government share of GDP to increase. 
B) the interest rate to increase. 
C) the interest rate to remain constant. 
D) the interest rate to decrease. 
E) net exports to increase.

Question 5

If the nongovernment share of GDP shifts to the right, the government share of GDP will decline.

Accepted Answer

A) True 
 B)False

Question 6

The effect a change in the sales tax has on investment depends, in part, on how sensitive net exports are to changes in the exchange rate.

Accepted Answer

A) True 
 B)False

Question 7

Suppose that, at the current interest rate, the sum of the consumption, investment, and net export shares is greater than the share available for nongovernment use.
Explain how the current interest rate will have to change to reach the long-run equilibrium. Illustrate the effect on each of the nongovernment shares of GDP.

Accepted Answer

The current interest rate will have to r

Question 8

As a result of changes in the tax laws in the late 1980s, interest payments on consumer loans were no longer deductible. How should this change in the tax law affect the consumption expenditure line, assuming everything else held equal?

Accepted Answer

As shown in the figure below, consumptio

Question 9

Suppose there is an increase in the government share of GDP.

Accepted Answer

The answer of Suppose there is an increase in the...

Question 10

Answer the questions below:

Accepted Answer

The answer of Answer the questions below:
  
...

Question 11

National saving in 2015 was

Accepted Answer

A) 14.1 percent of GDP. 
B) 1.4 percent of GDP. 
C) 20.2 percent of GDP. 
D) 31.3 percent of GDP. 
E) 41.6 percent of GDP. 
A) 14.1 percent of GDP. 
B) 1.4 percent of GDP. 
C) 20.2 percent of GDP. 
D) 31.3 percent of GDP. 
E) 41.6 percent of GDP.

Question 12

It is the government's responsibility to ensure that the sum of all four shares of GDP equals 1.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following best describes what would happen if all private retirement accounts were taxed?

Accepted Answer

A) Consumption expenditures would decline, driving up interest rates and resulting in investment expenditures declining. 
B) Consumption expenditures would increase, driving up interest rates and resulting in investment expenditures declining. 
C) Government expenditures would increase, causing consumption expenditures to decline, which would result in interest rates declining, which would cause investment expenditures to rise. 
D) Consumption expenditures would decline, driving down interest rates and resulting in investment expenditures increasing. 
E) Consumption expenditures would increase, causing government spending to increase, which would result in a decline in investment expenditures. 
A) Consumption expenditures would decline, driving up interest rates and resulting in investment expenditures declining. 
B) Consumption expenditures would increase, driving up interest rates and resulting in investment expenditures declining. 
C) Government expenditures would increase, causing consumption expenditures to decline, which would result in interest rates declining, which would cause investment expenditures to rise. 
D) Consumption expenditures would decline, driving down interest rates and resulting in investment expenditures increasing. 
E) Consumption expenditures would increase, causing government spending to increase, which would result in a decline in investment expenditures.

Question 14

Explain why the nongovernment share line of GDP slopes downward.

Accepted Answer

The nongovernment share line of GDP is,

Question 15

If state governments decide to cut both taxes and government spending, what will happen to the national saving rate and interest rates?

Accepted Answer

The effect on the saving rate cannot be

Question 16

Which of the following is an appropriate definition of the national saving rate?

Accepted Answer

A) The real interest rate that applies to the whole country 
B) The interest rate that makes people save 
C) The percentage of GDP that is not consumed or part of government expenditures 
D) The percentage of GDP that is consumed through banking transactions 
E) All of these 
A) The real interest rate that applies to the whole country 
B) The interest rate that makes people save 
C) The percentage of GDP that is not consumed or part of government expenditures 
D) The percentage of GDP that is consumed through banking transactions 
E) All of these

Question 17

The generation of people who lived through the Great Depression is much more fiscally conservative than the baby boom generation. The baby boomers have tended to spend more freely, amass more debt, and save significantly less than those who lived through the Great Depression.

Accepted Answer

The answer of The generation of people who lived through...

Question 18

The real interest rate, in the long run, is determined by

Accepted Answer

A) the exchange rate. 
B) the level of taxes. 
C) the balancing of the total spending with the supply of goods and services in the economy. 
D) the budget deficit. 
E) the rate of inflation. 
A) the exchange rate. 
B) the level of taxes. 
C) the balancing of the total spending with the supply of goods and services in the economy. 
D) the budget deficit. 
E) the rate of inflation.

Question 19

An increase in G reduces the national saving rate.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following is true?

Accepted Answer

A) The government purchases share of GDP is currently less than what it was during World War II. 
B) The government purchases share of GDP is currently greater than what it was during World War II. 
C) The consumption share is currently at the same level it was at during World War II. 
D) The net export share of GDP has been positive for the past 25 years. 
E) The government purchases share has remained constant over the past 25 years. 
A) The government purchases share of GDP is currently less than what it was during World War II. 
B) The government purchases share of GDP is currently greater than what it was during World War II. 
C) The consumption share is currently at the same level it was at during World War II. 
D) The net export share of GDP has been positive for the past 25 years. 
E) The government purchases share has remained constant over the past 25 years.

Exam 19: The Spending Allocation Model

If net exports become less sensitive to changes in exchange rates, the crowding-out effect of government spending will increase.

The consumption share will increase if there is a decrease in the real interest rate.

An increase in a sales tax could lead to an increase in investment.

Suppose the government share of GDP is 25 percent and the consumption, investment, and net export shares of GDP are 60, 15, and 3 percent, respectively. Under these circumstances, we would expect

If the nongovernment share of GDP shifts to the right, the government share of GDP will decline.

The effect a change in the sales tax has on investment depends, in part, on how sensitive net exports are to changes in the exchange rate.

As a result of changes in the tax laws in the late 1980s, interest payments on consumer loans were no longer deductible. How should this change in the tax law affect the consumption expenditure line, assuming everything else held equal?

Suppose there is an increase in the government share of GDP.

Answer the questions below:

National saving in 2015 was

It is the government's responsibility to ensure that the sum of all four shares of GDP equals 1.

Which of the following best describes what would happen if all private retirement accounts were taxed?

Explain why the nongovernment share line of GDP slopes downward.

If state governments decide to cut both taxes and government spending, what will happen to the national saving rate and interest rates?

Which of the following is an appropriate definition of the national saving rate?

The generation of people who lived through the Great Depression is much more fiscally conservative than the baby boom generation. The baby boomers have tended to spend more freely, amass more debt, and save significantly less than those who lived through the Great Depression.

The real interest rate, in the long run, is determined by

An increase in G reduces the national saving rate.

Which of the following is true?

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