Question 1

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 D

Question 2

If taxes are reduced,will most people save more or less than before? Does national saving rise or fall? Explain.

Accepted Answer

Lower taxes mean higher disposable income,which should encourage increases in both consumption and saving.Reduced government revenue,given government spending,means a decrease in government saving.Since private saving does not rise as much as the decrease in government saving,national saving falls.

Question 3

Suppose consumption is $500 billion,investment is $120 billion,government purchases equal $90 billion,and net exports are negative $20 billion.The saving rate   is ________.

Accepted Answer

A) 20% 
B) 83.3% 
C) 14.5% 
D) 3% 
E) none of the above 
A) 20% 
B) 83.3% 
C) 14.5% 
D) 3% 
E) none of the above C

Question 4

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 5

A budget deficit ________.

Accepted Answer

A) may have stimulative effects on economic activity in the short run 
B) contributes to lower interest rates in the long run 
C) is likely to increase future productive capacity in the long run 
D) all of the above 
E) none of the above 
A) may have stimulative effects on economic activity in the short run 
B) contributes to lower interest rates in the long run 
C) is likely to increase future productive capacity in the long run 
D) all of the above 
E) none of the above

Question 6

In a large open economy,an increase in ________ leads to ________.

Accepted Answer

A) desired saving;an increase in the domestic interest rate 
B) desired investment;an decrease in the domestic interest rate 
C) desired saving;an increase in desired investment 
D) desired saving;a decrease in actual investment 
E) none of the above 
A) desired saving;an increase in the domestic interest rate 
B) desired investment;an decrease in the domestic interest rate 
C) desired saving;an increase in desired investment 
D) desired saving;a decrease in actual investment 
E) none of the above

Question 7

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

Question 8

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 9

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 10

Consumption expenditures are a function of ________.

Accepted Answer

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

Question 11

The real interest rate ________.

Accepted Answer

A) is the cost of borrowing not adjusted for inflation 
B) keeps the market for saving and consumption 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 not adjusted for inflation 
B) keeps the market for saving and consumption in equilibrium 
C) describes the real benefit of saving 
D) all of the above 
E) none of the above

Question 12

Which of the following would lead domestic investment to rise?

Accepted Answer

A) an increase in government spending throughout the world 
B) an increase in world taxes 
C) an increase in world autonomous consumption 
D) all of the above 
E) none of the above 
A) an increase in government spending throughout the world 
B) an increase in world taxes 
C) an increase in world autonomous consumption 
D) all of the above 
E) none of the above

Question 13

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

Question 14

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) this is a closed economy 
B) this is a large economy 
C) the trade balance has changed in the same direction as the change in desired saving 
D) all of the above 
E) none of the above 
A) this is a closed economy 
B) this is a large economy 
C) the trade balance has changed in the same direction as the change in desired saving 
D) all of the above 
E) none of the above

Question 15

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

Accepted Answer

A) the difference between values H and D measures the net capital outflow 
B) the difference between values H and D measures the trade deficit 
C) the domestic real interest rate is indicated by B 
D) the difference between values H and F measures the trade deficit 
E) none of the above 
A) the difference between values H and D measures the net capital outflow 
B) the difference between values H and D measures the trade deficit 
C) the domestic real interest rate is indicated by B 
D) the difference between values H and F measures the trade deficit 
E) none of the above

Question 16

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 17

In an economy open to international trade ________.

Accepted Answer

A) saving equals investment in equilibrium 
B) saving is the difference between net exports and investment 
C) saving equals investment as long as the economy has no exports 
D) saving equals investment as long as NX=0 
E) none of the above 
A) saving equals investment in equilibrium 
B) saving is the difference between net exports and investment 
C) saving equals investment as long as the economy has no exports 
D) saving equals investment as long as NX=0 
E) none of the above

Question 18

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

Question 19

Increases in ________ typically lead to decreases in ________.

Accepted Answer

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

Question 20

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

Exam 4: Saving and Investment in Closed and Open Economies

Government saving refers to ________.

If taxes are reduced,will most people save more or less than before? Does national saving rise or fall? Explain.

Suppose consumption is $500 billion,investment is $120 billion,government purchases equal $90 billion,and net exports are negative $20 billion.The saving rate is ________.

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

A budget deficit ________.

In a large open economy,an increase in ________ leads to ________.

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 ________.

An investment tax credit ________.

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?

Consumption expenditures are a function of ________.

The real interest rate ________.

Which of the following would lead domestic investment to rise?

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

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

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

Net capital outflows ________.

In an economy open to international trade ________.

The concept of twin deficits refers to ________.

Increases in ________ typically lead to decreases in ________.

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

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 a large open economy,an increase in leads to .

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 .

Increases in typically lead to decreases in .