Question 1

Assume that I = S_Private + S_Government + (IM - X). Furthermore, let's say that imports are equal to exports. In this case, private savings:

Accepted Answer

Since imports are equal to exports, $IM-X=0$. Therefore, $I = S_Private + S_Government$. Private savings and government savings together equal investment, so private savings plus government savings are equal to investment. Therefore, the correct answer is D, plus government savings are equal to investment.

Question 2

Which statement is CORRECT?

Accepted Answer

The budget deficit represents the difference between government spending and tax revenues. This means that the government is spending more than it is taking in through taxes, which leads to a deficit. Option A is incorrect because transfer payments are not always included in the budget deficit. Option B is incorrect because private savings are not necessarily equal to government spending plus the budget deficit. Option C is incorrect because national savings may or may not be equal to tax revenues plus the budget deficit.

Question 3

Capital inflow equals:

Accepted Answer

Capital inflow is the total inflow of foreign funds minus the total outflow of domestic funds. Choice A is incorrect because it calculates GDP and net exports, not capital inflow. Choice B is incorrect because it calculates the growth in capital stock and investment spending, not capital inflow. Choice C is incorrect because foreign direct investment is only one type of capital inflow, not the total inflow.

Question 4

Taxes equal:

Accepted Answer

Taxes are levied on total income earned by individuals and organizations. Therefore, taxes can be calculated as total income minus consumption (spending on goods and services) minus private savings (income not spent but saved by individuals or organizations). Option C is the correct equation for taxes.

Question 5

If a country has a trade surplus, we can conclude that it also has a:

Accepted Answer

A trade surplus means the country exports more than it imports, leading to a net capital outflow as the country invests more abroad than foreign entities invest in it.

Question 6

In an open economy, government spending was $30 billion, consumption was $70 billion, taxes were $20 billion, GDP was $100 billion, and investment spending was $10 billion. As a result, there was:

Accepted Answer

In an open economy, GDP = C + I + G + (X - M). Here, GDP is $100 billion, C is $70 billion, I is $10 billion, G is $30 billion. So, $100 = $70 + $10 + $30 + (X - M), which simplifies to (X - M) = -$10 billion, indicating a trade deficit and a net capital inflow of $10 billion.

Question 7

Capital inflow into a country is associated with:

Accepted Answer

Capital inflow into a country is often associated with imports exceeding exports, as the country needs to bring in capital from abroad to finance the purchase of goods and services from other countries.

Question 8

Use the following to answer questions: 
-(Table: Investment Spending, Private Spending, and Capital Inflows) Use Table: Investment Spending, Private Spending, and Capital Inflows. Northlandia has a _____, while Southlandia has a _____.

Accepted Answer

The answer of Use the following to answer questions: 
-(Table:...

Question 9

Suppose that there is no trade and no government in a small economy. GDP is $25 trillion, and consumption spending is $18 trillion this year. There is a new government, and it imposes taxes on its citizens to spend on infrastructure. Taxes and government spending are both $2 trillion. What is the level of private saving now?

Accepted Answer

Private saving is equal to disposable income minus consumption spending. Disposable income is equal to GDP minus taxes, so disposable income is $25 trillion - $2 trillion = $23 trillion. Private saving is $23 trillion - $18 trillion = $5 trillion.

Question 10

Use the following to answer questions: 
-(Table: Investment Spending, Private Spending, and Capital Inflows) Use Table: Investment Spending, Private Spending, and Capital Inflows. What is the budget balance as a percentage of GDP in Northlandia?

Accepted Answer

The answer of Use the following to answer questions: 
-(Table:...

Question 11

Suppose that there is no trade and no government in a small economy. GDP is $25 trillion, and consumption spending is $18 trillion this year. There is a new government and it imposes taxes on its citizens to spend on infrastructure. Taxes and government spending are both $2 trillion. What is the level of investment spending now?

Accepted Answer

GDP = C + I + G
Before government intervention: 25 trillion = 18 trillion + I + 0
Therefore, I = $7 trillion
After government intervention: 25 trillion = 18 trillion + I + 2 trillion - 2 trillion
Solving for I, we get I = $5 trillion.

Question 12

National savings equals:

Accepted Answer

National savings equals private savings plus the budget balance. Private savings refers to the savings of individuals and businesses, while the budget balance is the difference between government spending and taxes. National savings represents the amount of resources that are available for investment in the economy, and is an important factor in determining economic growth. Choices A, B, and D do not accurately represent national savings.

Question 13

In an open economy, savings CANNOT come from:

Accepted Answer

Savings come from the portion of income that is not consumed, so they cannot come from consumption itself. Savings can come from domestic sources (including households and firms), foreign sources (including foreign investors and imports), and government sources (such as surpluses or decreases in government spending).

Question 14

Suppose that there is no trade and no government in a small economy. GDP is $25 trillion, and consumption spending is $18 trillion this year. What is the level of investment spending?

Accepted Answer

In a closed economy with no trade or government, GDP is equal to consumption plus investment (GDP = C+I). Therefore, investment spending is equal to GDP minus consumption spending, which is $25 trillion - $18 trillion = $7 trillion. Therefore, the correct answer is B) $7 trillion.

Question 15

Capital inflow is:

Accepted Answer

Capital inflow refers to the net inflow of funds into a country from foreign sources. It can come from sources such as foreign investment, loans, and remittances.

Question 16

Suppose that there is no trade and no government in a small economy. GDP is $25 trillion, and consumption spending is $18 trillion this year. What is the level of private saving?

Accepted Answer

Private saving equals GDP minus consumption spending, so private saving in this scenario is $25 trillion - $18 trillion = $7 trillion.

Question 17

Net capital inflow equals:

Accepted Answer

Net capital inflow is the difference between the imports and exports of a country. It measures the net flow of capital into a country in the form of investments and financial transfers.

Question 18

The budget balance equals:

Accepted Answer

The budget balance is calculated as taxes minus government spending. This measures the difference between what the government collects in taxes and what it spends.

Question 19

In an open economy, GDP is $12 trillion this year. Consumption is $8 trillion, and government spending is $2 trillion. Taxes are $0.5 trillion. Exports are $1 trillion, and imports are $3 trillion. How much is investment spending?

Accepted Answer

The answer of In an open economy, GDP is $12...

Question 20

Use the following to answer questions: 
-(Table: Investment Spending, Private Spending, and Capital Inflows) Use Table: Investment Spending, Private Spending, and Capital Inflows. What is the budget balance as a percentage of GDP in Southlandia?

Accepted Answer

The budget balance is calculated as the difference between government spending and revenues. In this table, government spending is equal to investment spending and private spending, which is $400 billion + $800 billion = $1.2 trillion. Government revenue is equal to capital inflows, which is $1.2 trillion. Therefore, the budget balance is $1.2 trillion - $1.2 trillion = $0.

As a percentage of GDP, the budget balance is calculated as ($0 / $12 trillion) x 100% = 0%. Therefore, the answer is B, 0%.

Quiz 10: Savings, Investment Spending, and the Financial Syst

Assume that I = S_Private + S_Government + (IM - X) . Furthermore, let's say that imports are equal to exports. In this case, private savings:

Which statement is CORRECT?

Capital inflow equals:

Taxes equal:

If a country has a trade surplus, we can conclude that it also has a:

In an open economy, government spending was $30 billion, consumption was $70 billion, taxes were $20 billion, GDP was $100 billion, and investment spending was $10 billion. As a result, there was:

Capital inflow into a country is associated with:

Use the following to answer questions: -(Table: Investment Spending, Private Spending, and Capital Inflows) Use Table: Investment Spending, Private Spending, and Capital Inflows. Northlandia has a _, while Southlandia has a _.

Use the following to answer questions: -(Table: Investment Spending, Private Spending, and Capital Inflows) Use Table: Investment Spending, Private Spending, and Capital Inflows. What is the budget balance as a percentage of GDP in Northlandia?

National savings equals:

In an open economy, savings CANNOT come from:

Suppose that there is no trade and no government in a small economy. GDP is $25 trillion, and consumption spending is $18 trillion this year. What is the level of investment spending?

Capital inflow is:

Suppose that there is no trade and no government in a small economy. GDP is $25 trillion, and consumption spending is $18 trillion this year. What is the level of private saving?

Net capital inflow equals:

The budget balance equals:

In an open economy, GDP is $12 trillion this year. Consumption is $8 trillion, and government spending is $2 trillion. Taxes are $0.5 trillion. Exports are $1 trillion, and imports are $3 trillion. How much is investment spending?

Use the following to answer questions: -(Table: Investment Spending, Private Spending, and Capital Inflows) Use Table: Investment Spending, Private Spending, and Capital Inflows. What is the budget balance as a percentage of GDP in Southlandia?

Quiz 10: Savings, Investment Spending, and the Financial Syst

Assume that I = SPrivate + SGovernment + (IM - X) . Furthermore, let's say that imports are equal to exports. In this case, private savings:

Which statement is CORRECT?

Capital inflow equals:

Taxes equal:

If a country has a trade surplus, we can conclude that it also has a:

In an open economy, government spending was $30 billion, consumption was $70 billion, taxes were $20 billion, GDP was $100 billion, and investment spending was $10 billion. As a result, there was:

Capital inflow into a country is associated with:

Use the following to answer questions: -(Table: Investment Spending, Private Spending, and Capital Inflows) Use Table: Investment Spending, Private Spending, and Capital Inflows. Northlandia has a _____, while Southlandia has a _____.

Use the following to answer questions: -(Table: Investment Spending, Private Spending, and Capital Inflows) Use Table: Investment Spending, Private Spending, and Capital Inflows. What is the budget balance as a percentage of GDP in Northlandia?

National savings equals:

In an open economy, savings CANNOT come from:

Suppose that there is no trade and no government in a small economy. GDP is $25 trillion, and consumption spending is $18 trillion this year. What is the level of investment spending?

Capital inflow is:

Suppose that there is no trade and no government in a small economy. GDP is $25 trillion, and consumption spending is $18 trillion this year. What is the level of private saving?

Net capital inflow equals:

The budget balance equals:

In an open economy, GDP is $12 trillion this year. Consumption is $8 trillion, and government spending is $2 trillion. Taxes are $0.5 trillion. Exports are $1 trillion, and imports are $3 trillion. How much is investment spending?

Use the following to answer questions: -(Table: Investment Spending, Private Spending, and Capital Inflows) Use Table: Investment Spending, Private Spending, and Capital Inflows. What is the budget balance as a percentage of GDP in Southlandia?

Assume that I = S_Private + S_Government + (IM - X) . Furthermore, let's say that imports are equal to exports. In this case, private savings:

Use the following to answer questions: -(Table: Investment Spending, Private Spending, and Capital Inflows) Use Table: Investment Spending, Private Spending, and Capital Inflows. Northlandia has a _, while Southlandia has a _.