Deck 16: The Balance of Payments: Net Exports and International Capital Flows

Question 1

Saving equals

A) current spending minus current income.
B) wealth minus assets.
C) assets minus liabilities.
D) current income minus spending on current needs.
E) current income minus transfers.

Answer 1

current income minus spending on current needs.

Question 2

Sam has the following assets and liabilities:
What is the value of Sam's assets?

A) $308,000.
B) $416,000.
C) $419,000.
D) $422,000.
E) $727,000.

Answer 2

$419,000.

Question 3

Assets are

A) current income minus spending on current needs.
B) the debts one owes.
C) saving minus investment.
D) anything of market value one owns.
E) stocks,bonds,and credit card balances.

Answer 3

anything of market value one owns.

Question 4

Saving divided by income equals the ________ rate.

A) interest
B) investment
C) saving
D) wealth
E) asset

Question 5

Anything of market value one owns is called a(n)

A) asset.
B) liability.
C) investment.
D) capital loss.
E) capital gain.

Question 6

Vickie earns $1,000 per week and spends $850 per week on living expenses,puts $50 in a savings account,and buys $100 worth of stocks.Vickie's saving is ________ and her saving rate is ________.

A) $50;5%
B) $50;5.9%
C) $100;10%
D) $100;11.8%
E) $150;15%

Question 7

Which of the following is a liability of a family?

A) A chequing account balance.
B) A share of stock.
C) A house.
D) A car.
E) An unpaid credit card balancE.

Question 8

The debts one owes are called

A) assets.
B) liabilities.
C) investments.
D) capital losses.
E) capital gains.

Question 9

Current income minus spending on current needs equals

A) saving.
B) wealth.
C) transfers.
D) investment.
E) assets minus liabilities.

Question 10

Sam has the following assets and liabilities:
What is the value of Sam's liabilities?

A) $300,000.
B) $303,000.
C) $308,000.
D) $311,000.
E) $727,000.

Question 11

Wealth equals

A) current income minus spending on current needs.
B) assets minus liabilities.
C) saving minus investment.
D) investment minus saving.
E) current income minus liabilities.

Question 12

Assets minus liabilities equal

A) saving.
B) investment.
C) wealth.
D) current income minus spending on current needs.
E) stocks,bonds,and credit card balances.

Question 13

Which of the following is an asset of a family?

A) A student loan.
B) A mortgage.
C) An unpaid credit card balance.
D) A chequing account balance.
E) A car loan.

Question 14

Which of the following is an asset of a family?

A) A student loan.
B) A mortgage.
C) An unpaid credit card balance.
D) A share of stock.
E) A car loan.

Question 15

Which of the following is a liability of a family?

A) A chequing account balance.
B) A share of stock.
C) A house.
D) A car.
E) A mortgagE.

Question 16

Vickie earns $1,500 per week and spends $1,000 per week on living expenses,puts $200 in a savings account,and buys $300 worth of stocks.Vickie's saving is ________ and her saving rate is ________.

A) $200;13.3%
B) $200;20%
C) $300;20%
D) $300;30%
E) $500;33.3%

Question 17

Liabilities are

A) current income minus spending on current needs.
B) the debts one owes.
C) saving minus investment.
D) anything of value one owns.
E) stocks,bonds,and credit card balances.

Question 18

The saving rate equals saving divided by

A) wealth.
B) assets.
C) liabilities.
D) income.
E) investment.

Question 19

Charles has the following assets and liabilities:
What is Charles' wealth?

A) $107,000.
B) $109,000.
C) $111,000.
D) $213,000.
E) $317,000.

Question 20

Sam has the following assets and liabilities:
What is Sam's wealth?

A) $105,000.
B) $107,000.
C) $111,000.
D) $419,000.
E) $727,000.

Question 21

Increases in the value of existing assets are called

A) saving.
B) investment.
C) wealth.
D) capital gains.
E) capital losses.

Question 22

If Alexandra deposits $1,000 from her paycheque into her chequing account and at the same time increases her credit card balance by $1,500,then her wealth

A) increases by $500.
B) increases by $1,000.
C) increases by $2,500.
D) decreases by $500.
E) decreases by $1,500.

Question 23

Which of the following is a flow?

A) Saving.
B) Wealth.
C) Assets.
D) Liabilities.
E) Money.

Question 24

If Doug drives his car into a tree,reducing the value of the car from $5,000 to $4,000,then Doug's wealth

A) increases by $4,000.
B) increases by $1,000.
C) does not change.
D) decreases by $1,000.
E) decreases by $4,000.

Question 25

Jay owns a classic car he purchased for $50,000.At a car rally,he is offered $75,000 for the car.Based on this information,

A) Jay's saving this year has increased by $25,000.
B) Jay's saving this year has decreased by $25,000.
C) Jay has a $25,000 capital gain.
D) Jay has a $25,000 capital loss.
E) Jay's wealth is unchanged.

Question 26

Saving $100 will

A) increase wealth by $100.
B) increase wealth by $100 only if the $100 is used to purchase an asset.
C) increase wealth by $100 only if the $100 is used to repay a debt.
D) decrease wealth by $100.
E) not change wealth.

Question 27

Decreases in the value of existing assets are called

A) dissaving.
B) disinvestment.
C) wealth.
D) capital gains.
E) capital losses.

Question 28

If Alexandra deposits $1,000 from her paycheque into her chequing account and at the same time increases her credit card balance by $1,500,then her saving equals

A) + $500.
B) + $1,000.
C) + $2,500.
D) - $500.
E) - $1,500.

Question 29

Charles has the following assets and liabilities:
What is the value of Charles' assets?

A) $109,000.
B) $203,000.
C) $210,000.
D) $213,000.
E) $317,000.

Question 30

A measure defined at a point in time is called a(n)________ variable.

A) real
B) nominal
C) aggregate
D) flow
E) stock

Question 31

Capital gains are

A) increases in the flow of investment.
B) increases in the flow of saving.
C) additions to plant and equipment.
D) increases in the value of existing assets.
E) decreases in the value of existing assets.

Question 32

If the shares of stock that Doug owns go up in value from $10,000 to $15,000,then Doug's wealth

A) increases by $15,000.
B) increases by $5,000.
C) does not change.
D) decreases by $5,000.
E) decreases by $15,000.

Question 33

Which of the following is a stock?

A) Saving.
B) Income.
C) Consumption.
D) Wealth.
E) Investment.

Question 34

Saving is a(n)________ and wealth is a(n)________.

A) flow;flow
B) flow;stock
C) asset;liability
D) liability;asset
E) stock;flow

Question 35

If Alexandra uses $800 from her chequing account to pay her credit card balance,her wealth

A) increases by $800.
B) decreases by $800.
C) increases by $1,600.
D) decreases by $1,600.
E) does not changE.

Question 36

Charles has the following assets and liabilities:
What is the value of Charles' liabilities?

A) $100,000.
B) $101,000.
C) $103,000.
D) $104,000.
E) $317,000.

Question 37

The stock of wealth increases more rapidly,the faster the flow of

A) income.
B) saving.
C) money.
D) assets.
E) consumption.

Question 38

The change in wealth during a period equals

A) saving + capital gains - capital losses.
B) saving - capital gains + capital losses.
C) saving - investment + capital gains - capital losses.
D) public saving + private saving - transfers.
E) public saving - private saving + transfers.

Question 39

Elaine owns a beautiful diamond ring she purchased for $2,500.When she has it appraised,she learns it is now worth $3,000.Based on this information,

A) Elaine's saving this year has increased by $500.
B) Elaine's saving this year has decreased by $500.
C) Elaine has a $500 capital gain.
D) Elaine has a $500 capital loss.
E) Elaine's wealth is unchanged.

Question 40

Capital losses are

A) decreases in the flow of investment.
B) decreases in the flow of saving.
C) the destruction of plant and equipment.
D) increases in the value of existing assets.
E) decreases in the value of existing assets.

Question 41

A flow is a measure defined

A) per unit of time.
B) at a point in time.
C) in real terms.
D) in nominal terms.
E) in the currency adjusted for the rate of inflation.

Question 42

The benefit of saving is the

A) nominal interest rate.
B) real interest rate.
C) inflation rate.
D) saving rate.
E) rate of capital gains.

Question 43

Rafael's current income is $100 more per month than his current consumption needs.He decides to use the $100 to reduce his credit card debt.As a result,his

A) liabilities will decrease and his wealth will increase.
B) liabilities and his wealth will decrease.
C) assets will decrease and his wealth will increase.
D) assets and his wealth will decrease.
E) assets and his wealth will increasE.

Question 44

Steve uses $300 from his paycheque to pay off his credit card balance.Based on this information,

A) Steve's wealth has increased by $300.
B) Steve's wealth has decreased by $300.
C) Steve has a capital gain of $300.
D) Steve has a capital loss of $300.
E) Steve's wealth is unchanged.

Question 45

A lower real rate of interest ________ the reward for saving and ________ the amount people need to save to reach a given target.

A) increases;increases
B) increases;decreases
C) decreases;does not change
D) decreases;decreases
E) decreases;increases

Question 46

On January 1,2010,Jay purchased shares of stock for $10,000.On December 31,2011,the same shares were worth $7,500.Based on this information,

A) Jay's saving for the year increased by $2,500.
B) Jay's saving for the year decreased by $2,500.
C) Jay had a $2,500 capital gain for the year.
D) Jay had a $2,500 capital loss for the year.
E) Jay's wealth was unchanged for the year.

Question 47

Life-cycle saving is saving

A) to meet long-term objectives,such as retirement,college attendance,or the purchase of a home.
B) for protection against unexpected setbacks,such as the loss of a job.
C) for the purpose of leaving an inheritance.
D) to pay life-insurance premiums.
E) by older people to induce younger people to care for them.

Question 48

If the saving rate in an economy decreases and capital gains (net of capital losses)are earned such that the capital gains are equal to the reduction in saving,then the economy's

A) wealth will decrease.
B) wealth will increase.
C) wealth will remain unchanged.
D) assets will decrease.
E) liabilities will decreasE.

Question 49

At the beginning of next year,Luis will deposit $50 in a saving account that will earn 10% interest per year.If there are no changes in his liabilities,at the end of the next year his wealth will have

A) increased by $50.
B) decreased by $50.
C) increased by $55.
D) decreased by $55.
E) not changed.

Question 50

A stock is a measure defined

A) per unit of time.
B) at a point in time.
C) in real terms.
D) in nominal terms.
E) in the currency adjusted for the rate of inflation.

Question 51

Saving to meet long-term objectives,such as retirement,university or college attendance,or to purchase a home,is called ________ saving.

A) public
B) national
C) precautionary
D) life-cycle
E) bequest

Question 52

Bequest saving is saving

A) to meet long-term objectives,such as retirement,college attendance,or the purchase of a home.
B) for protection against unexpected setbacks,such as the loss of a job.
C) for the purpose of leaving an inheritance.
D) to smooth income over one's lifetime.
E) done in anticipation of sales or bargain in the futurE.

Question 53

Precautionary saving is saving

A) to meet long-term objectives,such as retirement,college attendance,or the purchase of a home.
B) for protection against unexpected setbacks,such as the loss of a job.
C) for the purpose of leaving an inheritance.
D) to smooth income over one's lifetime.
E) done in anticipation of sales or bargain in the futurE.

Question 54

A higher real rate of interest ________ the reward for saving and ________ the amount people need to save to reach a given target.

A) increases;increases
B) increases;decreases
C) increases;does not change
D) decreases;decreases
E) decreases;increases

Question 55

Capital gains ______ peoples' wealth and therefore may _______ their saving out of income.

A) increase;increase
B) increase;decrease
C) decrease;increase
D) decrease;decrease
E) do not increase;not increase

Question 56

Identify the correct relationship from the list below.

A) Change in wealth = saving + capital losses - capital gains.
B) Savings = capital gains - change in wealth + capital losses.
C) Capital gains + capital losses = change in wealth - saving.
D) Change in wealth + capital losses = saving - capital gains.
E) Capital losses = capital gains - change in wealth + saving.

Question 57

Saving for protection against unexpected setbacks,such as the loss of a job or a medical emergency,is called ________ saving.

A) public
B) national
C) precautionary
D) life-cycle
E) bequest

Question 58

Steve has $500 automatically deducted from one of his paycheques to purchase Government of Canada Savings Bonds.Based on this information,

A) Steve's wealth has increased by $500.
B) Steve's wealth has decreased by $500.
C) Steve has a capital gain of $500.
D) Steve has a capital loss of $500.
E) Steve's wealth is unchanged.

Question 59

A measure defined per unit of time is called a ________ variable.

A) real
B) nominal
C) aggregate
D) flow
E) stock

Question 60

Saving for the purpose of leaving an inheritance is called ________ saving.

A) public
B) national
C) precautionary
D) life-cycle
E) bequest

Question 61

Fred and Norma just had a baby girl and want to make sure they save enough in the future to send her to college.This is an example of the ________ motive for saving.

A) life-cycle
B) public
C) private
D) precautionary
E) bequest

Question 62

If the real rate of interest increases,target savers will ________ the amount they save each year.

A) increase
B) decrease
C) not change
D) either increase or decrease
E) initially increase,then decrease

Question 63

A lower real interest rate has both positive and negative effects on saving;

A) it increases the reward for saving,but decreases the amount people need to save each year to reach a specific target.
B) it increases the reward for saving,and increases the amount people need to save each year to reach a specific target.
C) it decreases the reward for saving,and decreases the amount people need to save each year to reach a specific target.
D) it decreases the reward for saving,but increases the amount people need to save each year to reach a specific target.
E) it initially increases,then decreases,the reward for saving,but decreases the amount people need to save each year to reach a specific target.

Question 64

Jackie is saving more while she is young so she will have plenty of money to pay the membership fees when she joins a golf club during her retirement.This is an example of the ________ motive for saving.

A) life-cycle
B) public
C) private
D) precautionary
E) bequest

Question 65

The total saving available to the Canadian economy comes from

A) households and corporations only.
B) households only.
C) households,corporations and governments only.
D) non-residents and governments only.
E) households,corporations,governments,and non-residents.

Question 66

Psychological factors that may influence the saving rate are

A) the real interest rate and the demonstration effect.
B) self-control problems and the demonstration effect.
C) capital gains and the real interest rate.
D) the desire to leave a bequest and capital gains.
E) transfers and the inflation ratE.

Question 67

Bob decides to save more because he has heard rumours that his employer will be merging with another firm and many employees may lose their jobs.This is an example of the ________ motive for saving.

A) life-cycle
B) public
C) private
D) precautionary
E) bequest

Question 68

A higher real interest rate has both positive and negative effects on saving;

A) it increases the reward for saving,but decreases the amount people need to save each year to reach a specific target.
B) it increases the reward for saving,and increases the amount people need to save each year to reach a specific target.
C) it decreases the reward for saving,and decreases the amount people need to save each year to reach a specific target.
D) it decreases the reward for saving,but increases the amount people need to save each year to reach a specific target.
E) it initially increases,then decreases,the reward for saving,but decreases the amount people need to save each year to reach a specific target.

Question 69

If the real interest rate on saving accounts increases from 3% to 5%,all other things being equal,

A) business investment spending for new capital increases.
B) business investment spending for new capital remains unchanged.
C) people are less willing to save.
D) people are more willing to save.
E) the amount people save remains unchanged.

Question 70

When people base their spending decisions on the spending decisions of others,this is known as

A) a lack of self-control.
B) the demonstration effect.
C) the rational spending rule.
D) the multiplier effect.
E) the paradox of thrift.

Question 71

If the real rate of interest decreases,target savers will ________ the amount they save each year.

A) increase
B) decrease
C) not change
D) either increase or decrease
E) initially increase,then decrease

Question 72

All of the following will discourage people from saving EXCEPT

A) the increased availability of credit cards.
B) the ease of borrowing against the equity in their homes.
C) employer-sponsored pension plans.
D) the use of debit cards.
E) when satisfaction depends on relative living standards.

Question 73

Fred and Norma agree that they want to save so that they can leave a substantial amount to local charities in their wills.This is an example of the ________ motive for saving.

A) life-cycle
B) public
C) private
D) precautionary
E) bequest

Question 74

People save

A) only to meet long-term objectives.
B) only to meet both long-term objectives and to protect themselves against unexpected setbacks.
C) only to accumulate an estate to leave to family members,or to a charity.
D) to meet long-term objectives,to protect themselves against unexpected setbacks and to accumulate an estate to leave to family members or to a charity.
E) only to protect themselves against unexpected setbacks.

Question 75

Empirical evidence indicates that higher real interest rates lead to ________ in saving.

A) modest increases
B) significant increases
C) no change in
D) modest decreases
E) significant decreases

Question 76

The demonstration effect suggests that people will save less when they

A) base their spending decisions on the spending decisions of others who spend more than they do.
B) want to save,but lack the discipline to refrain from consuming.
C) recognize that the real interest rate has increased.
D) control their spending in order to save more when the real interest rate increases.
E) base their saving decisions on their projections of income and spending needs over their lifetimE.

Question 77

Empirical evidence indicates that lower real interest rates lead to ________ in saving.

A) modest increases
B) significant increases
C) no change in
D) modest decreases
E) significant decreases

Question 78

Ted and Rose are saving more today because they want to make sure that their children will inherit a large sum of money when they die.This is an example of the ________ motive for saving.

A) life-cycle
B) public
C) private
D) precautionary
E) bequest

Question 79

The self-control hypothesis suggests that people

A) base their spending decisions (and consequently their saving decisions)on the spending decisions of others.
B) want to save,but lack the discipline to refrain from consuming.
C) substantially decrease their saving when the real interest rate increases.
D) control their spending in order to save more when the real interest rate increases.
E) base their saving decisions on their projections of income and spending needs over their lifetimE.

Question 80

If the real interest rate on savings accounts decreases from 5% to 3%,all other things being equal,

A) business investment spending for new capital decreases.
B) business investment spending for new capital remains unchanged.
C) people are less willing to save.
D) people are more willing to save.
E) the amount people will save remains unchanged.