Exam 4: Saving and Investment in Closed and Open Economies

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

Increases in ________ typically lead to decreases in ________.

________ typically lead to increases in ________.

If a U.S. citizen deposits $10,000 in a foreign bank, and the bank uses the $10,000 to buy assets in the U.S., then ________.

In an economy open to international trade ________.

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

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

The 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?

Net capital outflows ________.

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

Government saving refers to ________.

The concept of twin deficits refers to ________.

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

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

When a U.S. firm sells a good abroad for, say, 100 euros (assume $1=1euro) , U.S. net exports increase by $100. These $100 in exports can be accounted for as $100 increase in capital outflow because ________.

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

In an economy open to international trade ________.

When a U.S. firm sells a good abroad for, say, 100 euros (assume $1.5=1euro) , U.S. net exports increase by $150. These $150 in exports can be accounted for as $150 increase in capital outflow because ________.

A foreign bank receives a deposit of $10,000 from a U.S. citizen. As a result, there is a net capital outflow from the U.S., if ________.