Question 1

The savings-investment spending identity says that:

Accepted Answer

The savings-investment spending identity states that for the economy as a whole, savings and investment spending must always be equal. This means that any excess of savings over investment spending by some individuals or sectors must be offset by deficit spending by others. This identity is a fundamental principle in macroeconomics that helps to explain the relationship between savings, investment, and economic growth.

Question 2

One difference between a closed and an open economy is that:

Accepted Answer

In an open economy, foreign savings can complement domestic savings in financing investment spending, allowing for more resources to be available for investment than would be possible with domestic savings alone. This is not the case in a closed economy, where investment can only be financed through domestic savings.

Question 3

According to the savings-investment spending identity:

Accepted Answer

The savings-investment spending identity states that savings equals investment spending, meaning that the amount of savings in an economy must be equal to the amount of investment spending. Therefore, choice A is the correct answer.

Question 4

The government saves when it:

Accepted Answer

A government with a budget surplus saves money because it is taking in more revenue than it is spending, allowing it to pay down debt or invest in other areas. A balanced budget means that the government is spending as much as it is taking in, so it is not necessarily saving money. A budget deficit means that the government is spending more than it is taking in, so it is not saving money. Borrowing by selling bonds may provide some temporary funding but it is not a savings mechanism.

Question 5

To help increase investment spending,the government can:

Accepted Answer

Lowering taxes on the returns from savings will make it more attractive for individuals and institutions to save their money, ultimately leading to an increase in the overall supply of loanable funds available for investment spending. This increase in the supply of loanable funds will put downward pressure on interest rates, which will make borrowing cheaper and encourage more investment spending.

Question 6

In a closed economy,government spending was $30 billion,consumption was $70 billion,taxes were $20 billion,and GDP was $110 billion this year.Investment spending was $10 billion.As a result:

Accepted Answer

Private savings can be calculated as GDP minus consumption minus taxes, minus government spending, minus investment spending. In this case, private savings = $110 billion - $70 billion - $20 billion - $30 billion - $10 billion = $-20 billion. This means that private savings weren't positive, but as the question asks for the closest option, the best choice is D, which states private savings were $20 billion.

Question 7

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 the net capital inflow?

Accepted Answer

Net capital inflow = Exports - Imports = $1 trillion - $3 trillion = -$2 trillion. Since this is a negative number, it means that there is a net capital outflow (meaning more money is leaving the economy than entering it). However, the question asks for the absolute value of the net capital inflow, which is $2 trillion.

Question 8

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 trillion...

Question 9

National savings is the sum of private savings and:

Accepted Answer

National savings is the sum of private savings and the budget balance, which is the difference between government revenues (mainly taxes) and government spending.

Question 10

In a closed economy,national savings equals:

Accepted Answer

National savings in a closed economy is equal to the total income available to individuals and businesses (disposable income) minus their consumption spending, plus any surplus from the government's tax receipts after subtracting its spending. Therefore, choice C, (disposable income minus consumption spending) plus (tax receipts minus government spending), is the correct formula for national savings in a closed economy.

Question 11

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 private saving?

Accepted Answer

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

Question 12

In an open economy,total investment equals:

Accepted Answer

In an open economy, total investment can come from three sources: domestic savings, government savings, and capital inflow. Therefore, total investment equals national savings plus capital inflow.

Question 13

In a closed economy,all investment spending must come from:

Accepted Answer

In a closed economy (one without foreign trade), all investment spending must come from national (domestic) savings since there are no foreign savings to invest. The government can also contribute to investment spending, but it is not the only source. Therefore, the correct choice is B - national savings.

Question 14

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 national saving?

Accepted Answer

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

Question 15

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.What is the government budget balance?

Accepted Answer

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

Question 16

National savings in a closed economy is NOT:

Accepted Answer

National savings in a closed economy is equal to the sum of private savings and the government budget balance, which is represented by the equation: S = (Y-T-C) + (T-G), where S is savings, Y is income, T is taxes, C is consumption, and G is government spending. Option D is incorrect because it incorrectly states that national savings is equal to government spending minus consumption.

Question 17

In a closed economy,investment spending,I,must equal:

Accepted Answer

In a closed economy (which means no trade with the outside world), investment spending equals GDP minus consumption (C) and government spending (G). This is because in the identity GDP = C + I + G (for a closed economy, where there is no net exports, X - M), rearranging for I gives I = GDP - C - G.

Question 18

In a closed economy,national savings equals private savings:

Accepted Answer

In a closed economy, national savings is equal to private savings plus the budget balance (which is the difference between government spending and tax revenues). So, option B is the correct answer. Options A, C, and D are not correct as they do not accurately reflect the relationship between national savings and private savings.

Question 19

The savings-investment spending identity says that savings and investment spending are:

Accepted Answer

The savings-investment spending identity states that, in any economy, total savings must equal total investment spending. This is because all savings must go somewhere, and if they are not used for personal consumption, they will be used to invest in assets such as stocks, bonds or real estate. Similarly, investment spending is the purchase of capital goods by businesses or the government to increase productivity, which in turn will lead to future economic growth. This identity holds true regardless of the presence of government budget deficits or trade surpluses/deficits.

Question 20

The government saves when tax revenue:

Accepted Answer

When tax revenue is more than government spending, there is a budget surplus which means the government has saved money. A budget deficit occurs when tax revenue is less than government spending, so option A is incorrect. Option C is also incorrect as this would suggest a balanced budget with no savings or spending. Option D is too vague and doesn't provide enough information to make an accurate choice.

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

The savings-investment spending identity says that:

One difference between a closed and an open economy is that:

According to the savings-investment spending identity:

The government saves when it:

To help increase investment spending,the government can:

In a closed economy,government spending was $30 billion,consumption was $70 billion,taxes were $20 billion,and GDP was $110 billion this year.Investment spending was $10 billion.As a result:

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 the net capital inflow?

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?

National savings is the sum of private savings and:

In a closed economy,national savings 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 private saving?

In an open economy,total investment equals:

In a closed economy,all investment spending must come from:

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 national saving?

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.What is the government budget balance?

National savings in a closed economy is NOT:

In a closed economy,investment spending,I,must equal:

In a closed economy,national savings equals private savings:

The savings-investment spending identity says that savings and investment spending are:

The government saves when tax revenue: