Question 1

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

Question 2

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

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

Question 4

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 investment in Region B has increased. 
B) There is a net capital flow from Region B to Region A. 
C) Actual investment in Region A has increased. 
D) all of the above 
E) none of the above

Question 5

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

Question 6

If desired saving increases in a small open economy,net exports (net capital outflow)rise.What happens to net exports if desired saving rises in most of the world's economies at the same time?

Accepted Answer

The answer of If desired saving increases in a small...

Question 7

Suppose GDP is $800 billion,net taxes equal $150 billion,government purchases are $160 billion,investment is $120 billion,and net exports are $5 billion.The private saving rate 
Is ________.

Accepted Answer

A) 19% 
B) 16% 
C) 21% 
D) 18% 
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

Question 9

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

Question 10

If there is a decrease in world investment ________.

Accepted Answer

A) domestic saving would rise 
B) net exports would decrease 
C) domestic output would go up 
D) all of the above 
E) none of the above

Question 11

An increase in ________ in an open economy of any size leads to ________.

Accepted Answer

A) desired saving;an increase in net capital outflows 
B) desired investment;a decrease in net capital outflows 
C) desired saving;an increase in the trade balance 
D) all of the above 
E) none of the above

Question 12

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

Question 13

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

Accepted Answer

The answer of If taxes are reduced,will most people save...

Question 14

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

Question 15

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

The answer of Which of the four government policies to...

Question 16

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 ________.

Accepted Answer

A) if the 100 euros are kept in the foreign bank,the U.S.firm is giving a loan to that bank 
B) if the U.S.firm uses the 100 euros to buy a share of stock in a foreign firm,the firm is supplying U.S.capital to that foreign firm 
C) if the U.S.firm uses the proceeds to build a new factory in that country,it is supplying U.S.capital to that country 
D) all of the above 
E) none of the above

Question 17

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

Question 18

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

Question 19

Which of the following would lead domestic investment to rise?

Accepted Answer

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

Question 20

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

Accepted Answer

The answer of Why is it important,for an open economy,that...

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 ________.

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

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 ________.

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

If desired saving increases in a small open economy,net exports (net capital outflow)rise.What happens to net exports if desired saving rises in most of the world's economies at the same time?

Suppose GDP is $800 billion,net taxes equal $150 billion,government purchases are $160 billion,investment is $120 billion,and net exports are $5 billion.The private saving rate Is ________.

In an economy open to international trade ________.

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 .

If there is a decrease in world investment ________.

An increase in in an open economy of any size leads 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 ________.

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

Increases in typically lead to decreases in .

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?

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 ________.

Which of the following would lead domestic investment to rise?

Which of the following would lead domestic investment to rise?

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