Question 1

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 2

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 3

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

Question 4

Suppose an economy has a GDP of $10 trillion,and that its national saving rate is 20%.If investment is 25% of GDP,the value of net exports is ________.

Accepted Answer

A) negative $500 billion 
B) $4.5 trillion 
C) negative $250 billion 
D) $2 trillion 
E) none of the above 
A) negative $500 billion 
B) $4.5 trillion 
C) negative $250 billion 
D) $2 trillion 
E) none of the above

Question 5

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 6

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 7

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 8

In an economy open to international trade ________.

Accepted Answer

A) saving is net exports added to investment 
B) saving equals investment as long as NX=0 
C) the domestic real interest rate should equal the world real interest rate as long as there is perfect capital mobility 
D) all of the above 
E) none of the above 
A) saving is net exports added to investment 
B) saving equals investment as long as NX=0 
C) the domestic real interest rate should equal the world real interest rate as long as there is perfect capital mobility 
D) all of the above 
E) none of the above

Question 9

Which of the four government policies to stimulate saving is essential? That is,which policy can on its own,regardless of the other policies,determine the level of the national saving rate?

Accepted Answer

Reduce budget deficits.A higher tax on c

Question 10

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

Question 11

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

Accepted Answer

A) if perfect capital mobility is assumed B) because with no barriers to capital flows,if rw > r domestic residents would just borrow 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) if perfect capital mobility is assumed B) because with no barriers to capital flows,if rw > r domestic residents would just borrow 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 12

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 13

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

Accepted Answer

A) the difference between values G and E measures the trade surplus 
B) the difference between values G and F 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 G and F 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 14

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 15

Why is it important,for an open economy,that investment not be consistently higher than saving?

Accepted Answer

When investment is higher than saving,th

Question 16

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 17

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 18

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 19

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 20

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

Exam 4: Saving and Investment in Closed and Open Economies

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

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

Private saving refers to ________.

Suppose an economy has a GDP of $10 trillion,and that its national saving rate is 20%.If investment is 25% of GDP,the value of net exports is ________.

Government saving refers to ________.

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

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 ________.

Which of the four government policies to stimulate saving is essential? That is,which policy can on its own,regardless of the other policies,determine the level of the national saving rate?

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

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

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 A,then ________.

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

Why is it important,for an open economy,that investment not be consistently higher than saving?

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

Increases in ________ typically lead to decreases in consumption

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

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

If government cuts taxes ________.

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

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