Question 1

In the long run,larger budget deficits lead to ________.

Accepted Answer

A) higher saving levels 
B) a fall in investment 
C) lower interest rates 
D) all of the above 
E) none of the above 
A) higher saving levels 
B) a fall in investment 
C) lower interest rates 
D) all of the above 
E) none of the above B

Question 2

How can the U.S.federal government induce increases in the national saving rate?

Accepted Answer

A) by lowering the sales tax 
B) by levying taxes on individual retirement (IR
A) accounts 
C) by reducing budget deficits 
D) all of the above 
E) none of the above 
A) by lowering the sales tax 
B) by levying taxes on individual retirement (IR
A) accounts 
C) by reducing budget deficits 
D) all of the above 
E) none of the above C

Question 3

The concept of twin deficits refers to ________.

Accepted Answer

A) the phenomenon of simultaneous trade and government budget deficits 
B) the phenomenon of simultaneous government and private budget deficits 
C) the phenomenon of simultaneous state and federal budget deficits 
D) all of the above 
E) none of the above 
A) the phenomenon of simultaneous trade and government budget deficits 
B) the phenomenon of simultaneous government and private budget deficits 
C) the phenomenon of simultaneous state and federal budget deficits 
D) all of the above 
E) none of the above A

Question 4

The saving-investment analysis for large open economies is somewhat more complicated than the analysis for small open economies mainly because ________.

Accepted Answer

A) there is more information to keep track of for larger economies 
B) there are more unknowns in larger economies 
C) a larger economy may actually affect the world economy 
D) all of the above 
E) none of the above 
A) there is more information to keep track of for larger economies 
B) there are more unknowns in larger economies 
C) a larger economy may actually affect the world economy 
D) all of the above 
E) none of the above

Question 5

"Crowding out" refers to the decrease in ________ that may result from an increase in government spending.

Accepted Answer

A) private investment 
B) imports 
C) private saving 
D) all of the above 
E) none of the above 
A) private investment 
B) imports 
C) private saving 
D) all of the above 
E) none of the above

Question 6

In the equation S =  
-  
- C  
-  
,which of the following is an endogenous variable?

Accepted Answer

A) r 
B)    
C)    
D) all of the above 
E) none of the above 
A) r 
B)    
C)    
D) all of the above 
E) none of the above

Question 7

In a small open economy,goods market equilibrium occurs when desired saving minus desired investment equals net exports.Explain.

Accepted Answer

The domestic interest rate equals the wo

Question 8

A small open economy would typically enjoy a higher trade balance if,in the domestic economy,________.

Accepted Answer

A) autonomous consumption expenditures increase 
B) taxes decrease 
C) government spending decreases 
D) all of the above 
E) none of the above 
A) autonomous consumption expenditures increase 
B) taxes decrease 
C) government spending decreases 
D) all of the above 
E) none of the above

Question 9

How does a decline in the real interest rate cause an increase in investment?

Accepted Answer

The real interest rate is the reward for

Question 10

If there is a decline in world autonomous consumption ________.

Accepted Answer

A) the domestic real interest rate would fall 
B) domestic investment would rise 
C) net exports would fall 
D) all of the above 
E) none of the above 
A) the domestic real interest rate would fall 
B) domestic investment would rise 
C) net exports would fall 
D) all of the above 
E) none of the above

Question 11

If policymakers in an open economy want to increase the wealth of their citizens,should they seek to increase saving,or to increase investment? Explain.

Accepted Answer

Policies to increase investment will inc

Question 12

Saving-Investment Diagram  
-Based on the Saving-Investment Diagram,if the domestic real interest rate is indicated by B,then ________.

Accepted Answer

A) the value of net exports is zero 
B) the diagram represents a closed economy 
C) the world real interest rate is indicated by A 
D) the difference between values F and E measures the net capital inflow 
E) none of the above 
A) the value of net exports is zero 
B) the diagram represents a closed economy 
C) the world real interest rate is indicated by A 
D) the difference between values F and E measures the net capital inflow 
E) none of the above

Question 13

The real interest rate ________.

Accepted Answer

A) is the cost of borrowing adjusted for inflation 
B) keeps the market for saving and investment in equilibrium 
C) describes the real benefit of saving 
D) all of the above 
E) none of the above 
A) is the cost of borrowing adjusted for inflation 
B) keeps the market for saving and investment in equilibrium 
C) describes the real benefit of saving 
D) all of the above 
E) none of the above

Question 14

A small open economy would typically enjoy a higher trade balance if,in the domestic economy,________.

Accepted Answer

A) autonomous consumption expenditures decrease 
B) taxes go up 
C) government spending decreases 
D) all of the above 
E) none of the above 
A) autonomous consumption expenditures decrease 
B) taxes go up 
C) government spending decreases 
D) all of the above 
E) none of the above

Question 15

In the long run,if government increases spending ________.

Accepted Answer

A) interest rates decrease 
B) it crowds out private investment 
C) saving increases 
D) all of the above 
E) none of the above 
A) interest rates decrease 
B) it crowds out private investment 
C) saving increases 
D) all of the above 
E) none of the above

Question 16

Saving-Investment Diagram  
-Based on the Saving-Investment Diagram,if the difference between values G and E measures the net capital outflow,then ________.

Accepted Answer

A) the difference between values G and E measures the trade surplus 
B) the difference between values H and D measures the trade surplus 
C) the domestic real interest rate is indicated by B 
D) desired saving has decreased 
E) none of the above 
A) the difference between values G and E measures the trade surplus 
B) the difference between values H and D measures the trade surplus 
C) the domestic real interest rate is indicated by B 
D) desired saving has decreased 
E) none of the above

Question 17

In an economy open to international trade where the interest rate at which saving and investment would be equal is ________ the world real interest rate ________.

Accepted Answer

A) above;a trade surplus ensues 
B) below;a trade deficit ensues 
C) above;there is a net capital outflow 
D) below;there is a net capital inflow 
E) none of the above 
A) above;a trade surplus ensues 
B) below;a trade deficit ensues 
C) above;there is a net capital outflow 
D) below;there is a net capital inflow 
E) none of the above

Question 18

When an economy becomes attractive to global investors,sparking a capital inflow,one result is often a decrease in net exports.Why?

Accepted Answer

The capital inflow reflects an increase

Question 19

In an open economy,Y = C + I + G + NX.From this we may infer that ________.

Accepted Answer

A) output is greater in an open economy than in a closed economy 
B) the condition for goods market equilibrium is that S = I + G + NX 
C) net exports can be zero only if the domestic real interest rate is equal to the world real interest rate 
D) if saving is greater than zero,NX cannot be zero 
E) none of the above 
A) output is greater in an open economy than in a closed economy 
B) the condition for goods market equilibrium is that S = I + G + NX 
C) net exports can be zero only if the domestic real interest rate is equal to the world real interest rate 
D) if saving is greater than zero,NX cannot be zero 
E) none of the above

Question 20

Ceteris paribus,in a closed economy,if consumers become more pessimistic ________.

Accepted Answer

A) autonomous consumption will fall 
B) investment will fall 
C) saving will increase 
D) all of the above 
E) none of the above 
A) autonomous consumption will fall 
B) investment will fall 
C) saving will increase 
D) all of the above 
E) none of the above

Exam 4: Saving and Investment in Closed and Open Economies

In the long run,larger budget deficits lead to ________.

How can the U.S.federal government induce increases in the national saving rate?

The concept of twin deficits refers to ________.

The saving-investment analysis for large open economies is somewhat more complicated than the analysis for small open economies mainly because ________.

"Crowding out" refers to the decrease in ________ that may result from an increase in government spending.

In the equation S = - - C - ,which of the following is an endogenous variable?

In a small open economy,goods market equilibrium occurs when desired saving minus desired investment equals net exports.Explain.

A small open economy would typically enjoy a higher trade balance if,in the domestic economy,________.

How does a decline in the real interest rate cause an increase in investment?

If there is a decline in world autonomous consumption ________.

If policymakers in an open economy want to increase the wealth of their citizens,should they seek to increase saving,or to increase investment? Explain.

Saving-Investment Diagram -Based on the Saving-Investment Diagram,if the domestic real interest rate is indicated by B,then ________.

The real interest rate ________.

A small open economy would typically enjoy a higher trade balance if,in the domestic economy,________.

In the long run,if government increases spending ________.

Saving-Investment Diagram -Based on the Saving-Investment Diagram,if the difference between values G and E measures the net capital outflow,then ________.

In an economy open to international trade where the interest rate at which saving and investment would be equal is ________ the world real interest rate ________.

When an economy becomes attractive to global investors,sparking a capital inflow,one result is often a decrease in net exports.Why?

In an open economy,Y = C + I + G + NX.From this we may infer that ________.

Ceteris paribus,in a closed economy,if consumers become more pessimistic ________.

The Policy and Practice of Macroeconomics

Measuring Macroeconomic Data

Aggregate Production and Productivity

Money and Inflation

The Sources of Growth and the Solow Model

Drivers of Growth: Technology, policy, and Institutions

Business Cycles: an Introduction

The Is Curve

Monetary Policy and Aggregate Demand

Aggregate Supply and the Phillips Curve

The Aggregate Demand and Supply Model

Macroeconomic Policy and Aggregate Demand and Supply Analysis

The Financial System and Economic Growth

Financial Crises and the Economy

Fiscal Policy and the Government Budget

Exchange Rates and International Economic Policy

Consumption and Saving

Investment

The Labor Market, employment, and Unemployment

The Role of Expectations in Macroeconomic Policy

Modern Business Cycle Theory

Filters

In an economy open to international trade where the interest rate at which saving and investment would be equal is the world real interest rate .