Question 1

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

Accepted Answer

A) implementing a value added tax 
B) lowering the capital gains tax 
C) reducing budget deficits 
D) all of the above 
E) none of the above 
A) implementing a value added tax 
B) lowering the capital gains tax 
C) reducing budget deficits 
D) all of the above 
E) none of the above

Question 2

An increase in autonomous investment in a small open economy will cause ________.

Accepted Answer

A) a trade surplus to shrink 
B) a trade deficit to increase 
C) lower net capital outflows 
D) all of the above 
E) none of the above 
A) a trade surplus to shrink 
B) a trade deficit to increase 
C) lower net capital outflows 
D) all of the above 
E) none of the above

Question 3

Government saving refers to ________.

Accepted Answer

A) tax revenues minus transfers minus government purchases 
B) tax revenues plus transfers minus government consumption 
C) the saving rate times transfers 
D) national plus private saving 
E) none of the above 
A) tax revenues minus transfers minus government purchases 
B) tax revenues plus transfers minus government consumption 
C) the saving rate times transfers 
D) national plus private saving 
E) none of the above

Question 4

Increases in ________ typically lead to decreases in consumption

Accepted Answer

A) the interest rate 
B) disposable income 
C) autonomous consumption 
D) all of the above 
E) none of the above 
A) the interest rate 
B) disposable income 
C) autonomous consumption 
D) all of the above 
E) none of the above

Question 5

An increase in autonomous investment in a small open economy will cause ________.

Accepted Answer

A) a trade surplus to shrink 
B) a trade deficit to shrink 
C) higher net capital outflows 
D) all of the above 
E) none of the above 
A) a trade surplus to shrink 
B) a trade deficit to shrink 
C) higher net capital outflows 
D) all of the above 
E) none of the above

Question 6

If we observe an economy in which desired saving has changed,but there has been no change in actual investment,we may infer that ________.

Accepted Answer

A) net exports have changed 
B) actual saving has changed 
C) the domestic real interest rate has not changed 
D) all of the above 
E) none of the above 
A) net exports have changed 
B) actual saving has changed 
C) the domestic real interest rate has not changed 
D) all of the above 
E) none of the above

Question 7

Net capital outflows ________.

Accepted Answer

A) are also known as net foreign investment 
B) are positive if saving is greater than investment 
C) are also known as the trade balance 
D) all of the above 
E) none of the above 
A) are also known as net foreign investment 
B) are positive if saving is greater than investment 
C) are also known as the trade balance 
D) all of the above 
E) none of the above

Question 8

Increases in ________ typically lead to decreases in private saving.

Accepted Answer

A) the interest rate 
B) disposable income 
C) autonomous consumption 
D) all of the above 
E) none of the above 
A) the interest rate 
B) disposable income 
C) autonomous consumption 
D) all of the above 
E) none of the above

Question 9

If the world real interest rate were to fall below the rate at which domestic saving and investment would be equal ________.

Accepted Answer

A) saving would be greater than investment so the economy would be running a trade deficit 
B) investment would be greater than saving so the economy would be running a trade deficit 
C) investment would be greater than saving so the economy would be running a trade surplus 
D) saving would be greater than investment so the economy would be running a trade surplus 
E) none of the above 
A) saving would be greater than investment so the economy would be running a trade deficit 
B) investment would be greater than saving so the economy would be running a trade deficit 
C) investment would be greater than saving so the economy would be running a trade surplus 
D) saving would be greater than investment so the economy would be running a trade surplus 
E) none of the above

Question 10

Suppose the world economy is divided into two halves.In Region A,all economies experience a decrease in desired saving,while desired saving is unchanged in Region B.If there is open trade and perfect capital mobility across the two regions,which of the following is true?

Accepted Answer

A) Actual saving in Region B has increased. 
B) Actual investment in Region A has increased. 
C) Region A's imports from Region B have decreased. 
D) all of the above 
E) none of the above 
A) Actual saving in Region B has increased. 
B) Actual investment in Region A has increased. 
C) Region A's imports from Region B have decreased. 
D) all of the above 
E) none of the above

Question 11

If government cuts taxes ________.

Accepted Answer

A) national saving goes up 
B) the equilibrium interest rate would decrease 
C) discretionary income goes up 
D) all of the above 
E) none of the above 
A) national saving goes up 
B) the equilibrium interest rate would decrease 
C) discretionary income goes up 
D) all of the above 
E) none of the above

Question 12

If there is a decline in world autonomous consumption ________.

Accepted Answer

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

Question 13

The domestic real interest rate (r)for a given country must be the same as the world real interest rate (rw)________.

Accepted Answer

A) only if capital is not perfectly mobile B) because with no barriers to capital flows,if rw > r domestic residents would just lend abroad putting upward pressures on the domestic rate until both rates equal each other C) because with no barriers to capital flows,if rw < r domestic residents would only lend to foreigners putting downward pressures on the domestic rate until both rates equal each other D) all of the above E) none of the above A) only if capital is not perfectly mobile B) because with no barriers to capital flows,if rw > r domestic residents would just lend abroad putting upward pressures on the domestic rate until both rates equal each other C) because with no barriers to capital flows,if rw < r domestic residents would only lend to foreigners putting downward pressures on the domestic rate until both rates equal each other D) all of the above E) none of the above

Question 14

In the model of the open economy with perfect capital mobility,________ is an exogenous variable.

Accepted Answer

A) Y 
B) C 
C) I 
D) S 
E) r 
A) Y 
B) C 
C) I 
D) S 
E) r

Question 15

An investment tax credit ________.

Accepted Answer

A) is designed to incentivize higher capital stock expenditures at any given interest rate 
B) may lead to increases in autonomous investment 
C) may put upward pressure on the interest rate 
D) all of the above 
E) none of the above 
A) is designed to incentivize higher capital stock expenditures at any given interest rate 
B) may lead to increases in autonomous investment 
C) may put upward pressure on the interest rate 
D) all of the above 
E) none of the above

Question 16

Saving-Investment Diagram  
-Based on the Saving-Investment Diagram,the difference between values H and E could measure the net capital inflow,if ________.

Accepted Answer

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

Question 17

Which of the following is true of a small open economy,but not of a large open economy?

Accepted Answer

A) Net exports are unlikely to be close to zero. 
B) The domestic real interest rate is equal to the world real interest rate. 
C) Changes in desired investment result in changes in the trade balance. 
D) Changes in desired investment result in changes in actual investment. 
E) none of the above 
A) Net exports are unlikely to be close to zero. 
B) The domestic real interest rate is equal to the world real interest rate. 
C) Changes in desired investment result in changes in the trade balance. 
D) Changes in desired investment result in changes in actual investment. 
E) none of the above

Question 18

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

Accepted Answer

A) autonomous consumption would decrease 
B) the equilibrium interest rate should increase 
C) saving should increase 
D) all of the above 
E) none of the above 
A) autonomous consumption would decrease 
B) the equilibrium interest rate should increase 
C) saving should increase 
D) all of the above 
E) none of the above

Question 19

Government saving refers to ________.

Accepted Answer

A) tax revenues minus transfers minus government consumption minus government investment 
B) the government's tax receipts minus its outlays 
C) national saving minus private saving 
D) all of the above 
E) none of the above 
A) tax revenues minus transfers minus government consumption minus government investment 
B) the government's tax receipts minus its outlays 
C) national saving minus private saving 
D) all of the above 
E) none of the above

Question 20

Private saving refers to ________.

Accepted Answer

A) after-tax income minus consumption expenditures 
B) a flow variable which adds to the stock of wealth 
C) the private saving rate times disposable income 
D) all of the above 
E) none of the above 
A) after-tax income minus consumption expenditures 
B) a flow variable which adds to the stock of wealth 
C) the private saving rate times disposable income 
D) all of the above 
E) none of the above

Exam 4: Saving and Investment in Closed and Open Economies

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

An increase in autonomous investment in a small open economy will cause ________.

Government saving refers to ________.

Increases in ________ typically lead to decreases in consumption

An increase in autonomous investment in a small open economy will cause ________.

If we observe an economy in which desired saving has changed,but there has been no change in actual investment,we may infer that ________.

Net capital outflows ________.

Increases in ________ typically lead to decreases in private saving.

If the world real interest rate were to fall below the rate at which domestic saving and investment would be equal ________.

Suppose the world economy is divided into two halves.In Region A,all economies experience a decrease in desired saving,while desired saving is unchanged in Region B.If there is open trade and perfect capital mobility across the two regions,which of the following is true?

If government cuts taxes ________.

If there is a decline in world autonomous consumption ________.

The domestic real interest rate (r)for a given country must be the same as the world real interest rate (rw)________.

In the model of the open economy with perfect capital mobility,________ is an exogenous variable.

An investment tax credit ________.

Saving-Investment Diagram -Based on the Saving-Investment Diagram,the difference between values H and E could measure the net capital inflow,if ________.

Which of the following is true of a small open economy,but not of a large open economy?

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

Government saving refers to ________.

Private saving refers to ________.

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

The domestic real interest rate (r)for a given country must be the same as the world real interest rate (r^w)________.