Question 1

For a closed economy,GDP is $11 trillion,consumption is $7 trillion,taxes are $3 trillion and the government runs a surplus of $1 trillion.What are private saving and national saving?

Accepted Answer

The answer of For a closed economy,GDP is $11 trillion,consumption...

Question 2

Suppose the economy is closed and consumption is 6,500,taxes are 1,500,and government purchases are 2,000.If national saving amounts to 1,000,then what is GDP?

Accepted Answer

The answer of Suppose the economy is closed and consumption...

Question 3

According to the definitions of national saving and private saving,if Y,C,and G remained the same,an increase in taxes would

Accepted Answer

An increase in taxes would reduce disposable income which would lead to a reduction in private savings. However, national saving would remain unchanged as any reduction in private saving would be offset by an increase in government saving (from the increased tax revenue). Therefore, the correct choice is D, which states that national saving would be left unchanged and private saving would be reduced.

Question 4

In a closed economy,national saving is

Accepted Answer

In a closed economy, national saving (S) is the amount of income that is not spent or consumed (Y-C) and is instead saved (S = Y-C). Investment (I) is the amount of spending on capital goods. In a closed economy, there is no international trade, so all saving goes towards investment. Therefore, S=I, making choice B the correct answer. National saving can sometimes be greater or sometimes be less than investment, depending on the economic situation, but in a closed economy, S and I must be equal.

Question 5

Which of the following expressions must be equal to national saving for a closed economy?

Accepted Answer

In a closed economy, national saving can be represented as Y - C - G because all production (Y) is either consumed (C), saved (which is not spent and hence not included in C), or used for government spending (G). Investment (I) and net exports (NX) are not included in national saving because they represent uses of national income that are not saved.

Question 6

Suppose the economy is closed with national saving of $2 trillion,consumption of $8 trillion,and government purchases of $1 trillion.What is GDP?

Accepted Answer

The answer of Suppose the economy is closed with national...

Question 7

Suppose that in a closed economy GDP is equal to 11,000,taxes are equal to 2,500,consumption equals 7,000,and government purchases equal 3,000.What are private saving and public saving?

Accepted Answer

The answer of Suppose that in a closed economy GDP...

Question 8

For an imaginary closed economy,T = $5,000; S = $11,000; C = $50,000; and the government is running a budget deficit of $1,000.Then

Accepted Answer

Private saving = S - T = $11,000 - $5,000 = $6,000. 
National income (Y) = C + I + G, where I (investment) = S + (T - G) = $6,000 + ($1,000) = $7,000. 
Therefore, GDP(income) = Y = $50,000 + $7,000 = $57,000. However, the question is asking for GDP(expenditure), so we need to adjust for net exports (NX = 0 for a closed economy):
GDP(expenditure) = C + I + G + NX = $57,000 + 0 = $57,000. 
But since the government is running a budget deficit, G is greater than T, so we need to add the deficit to get total spending:
GDP(expenditure) = C + I + G + deficit = $50,000 + $7,000 + $6,000 + $1,000 = $64,000. 
Therefore, the correct answer is C, with private saving = $6,000 and GDP = $67,000.

Question 9

Suppose that in a closed economy GDP is equal to 11,000,taxes are equal to 1,500,consumption equals 7,500,and government purchases equal 2,000.What is national saving?

Accepted Answer

The answer of Suppose that in a closed economy GDP...

Question 10

In a small closed economy investment is $50 billion and private saving is $55 billion.What are public saving and national saving?

Accepted Answer

The answer of In a small closed economy investment is...

Question 11

Consider the expressions T - G and Y - T - C.Which of the following statements is correct?

Accepted Answer

- T - G represents government saving or public saving, which is the amount of income the government retains after it has paid for its expenditures.
- Y - T - C is private saving, which is the amount of income individuals and households retain after they have paid for consumption and taxes.

Therefore, the first expression (T - G) is public saving, and the second expression (Y - T - C) is private saving. Hence, the correct choice is D.

Question 12

Suppose a closed economy had public saving of $2 trillion and private saving of $4 trillion.What are national saving and investment for this country?

Accepted Answer

The answer of Suppose a closed economy had public saving...

Question 13

In a closed economy,national saving equals

Accepted Answer

All of the options are correct. 
- Option A: Investment is equal to national saving in a closed economy because there are no foreign transactions, so any saving in the economy will be used to fund domestic investment. 
- Option B: National saving can be calculated as the difference between national income and national expenditure. Consumption and government purchases are components of national expenditure. Hence, saving equals income minus the sum of consumption and government purchases. 
- Option C: National saving consists of both private saving (saving by households and firms) and public saving (government saving). Hence, national saving can be expressed as the sum of private and public saving.

Question 14

According to the definitions of national saving and public saving,if Y,C,and G remained the same,an increase in taxes would

Accepted Answer

An increase in taxes would not affect Y,C, and G. Therefore, it would only decrease private saving, which is the difference between Y and C. This decrease in private saving would be offset by an increase in public saving, which is the difference between G and T. Therefore, national saving would remain unchanged while public saving would increase.

Question 15

For a closed economy,GDP is $11 trillion,consumption is $7 trillion,taxes are $2 trillion and the government runs a deficit of $1 trillion.What are private saving and national saving?

Accepted Answer

The answer of For a closed economy,GDP is $11 trillion,consumption...

Question 16

Which of the following equations represents GDP for an open economy?

Accepted Answer

The equation Y = C + I + G + NX represents GDP for an open economy, where Y is GDP, C is consumption, I is investments, G is government spending, and NX is net exports. In an open economy, net exports (exports minus imports) are included in the calculation of GDP.

Question 17

Suppose that in a closed economy GDP is equal to 11,000,taxes are equal to 2,500 consumption equals 7,500 and government purchases equal 2,000.What are private saving,public saving,and national saving?

Accepted Answer

The answer of Suppose that in a closed economy GDP...

Question 18

According to the definitions of private and public saving,if Y,C,and G remained the same,an increase in taxes would

Accepted Answer

An increase in taxes would lower disposable income, thereby reducing private saving. However, the government would receive more tax revenue, increasing public saving. Therefore, private saving would decrease and public saving would increase.

Question 19

If in a closed economy Y = $11 trillion,which of the following combinations would be consistent with national saving of $2.5 trillion?

Accepted Answer

The answer of If in a closed economy Y =...

Question 20

Suppose that in a closed economy GDP is 11,000,consumption is 7,500,and taxes are 2,000.What value of government purchases would make national savings equal to 1,000 and at that value would the government have a deficit or surplus?

Accepted Answer

National savings = GDP - Consumption - Taxes

Solving for national savings, we get:

National savings = 11,000 - 7,500 - 2,000 = 1,500

To make national savings equal to 1,000, we need to subtract 500 from the current level of national savings. This means government purchases must increase by 500. Therefore, the answer is:

Government purchases = 2,000 + 500 = 2,500, which is choice A.

However, we also need to determine whether the government would have a deficit or surplus at this level of government purchases. To do this, we use the following equation:

Government budget balance = Taxes - Government purchases

Substituting the given values, we get:

Government budget balance = 2,000 - 2,500 = -500

Since the government budget balance is negative, this means the government has a deficit. Choice A is the best answer.

Quiz 18: Saving,investment,and the Financial System

For a closed economy,GDP is $11 trillion,consumption is $7 trillion,taxes are $3 trillion and the government runs a surplus of $1 trillion.What are private saving and national saving?

Suppose the economy is closed and consumption is 6,500,taxes are 1,500,and government purchases are 2,000.If national saving amounts to 1,000,then what is GDP?

According to the definitions of national saving and private saving,if Y,C,and G remained the same,an increase in taxes would

In a closed economy,national saving is

Which of the following expressions must be equal to national saving for a closed economy?

Suppose the economy is closed with national saving of $2 trillion,consumption of $8 trillion,and government purchases of $1 trillion.What is GDP?

Suppose that in a closed economy GDP is equal to 11,000,taxes are equal to 2,500,consumption equals 7,000,and government purchases equal 3,000.What are private saving and public saving?

For an imaginary closed economy,T = $5,000; S = $11,000; C = $50,000; and the government is running a budget deficit of $1,000.Then

Suppose that in a closed economy GDP is equal to 11,000,taxes are equal to 1,500,consumption equals 7,500,and government purchases equal 2,000.What is national saving?

In a small closed economy investment is $50 billion and private saving is $55 billion.What are public saving and national saving?

Consider the expressions T - G and Y - T - C.Which of the following statements is correct?

Suppose a closed economy had public saving of $2 trillion and private saving of $4 trillion.What are national saving and investment for this country?

In a closed economy,national saving equals

According to the definitions of national saving and public saving,if Y,C,and G remained the same,an increase in taxes would

For a closed economy,GDP is $11 trillion,consumption is $7 trillion,taxes are $2 trillion and the government runs a deficit of $1 trillion.What are private saving and national saving?

Which of the following equations represents GDP for an open economy?

Suppose that in a closed economy GDP is equal to 11,000,taxes are equal to 2,500 consumption equals 7,500 and government purchases equal 2,000.What are private saving,public saving,and national saving?

According to the definitions of private and public saving,if Y,C,and G remained the same,an increase in taxes would

If in a closed economy Y = $11 trillion,which of the following combinations would be consistent with national saving of $2.5 trillion?

Suppose that in a closed economy GDP is 11,000,consumption is 7,500,and taxes are 2,000.What value of government purchases would make national savings equal to 1,000 and at that value would the government have a deficit or surplus?