Question 1

Suppose the economy is closed and consumption is 8 million,taxes are 2 million,and government purchases are 1.75 million.If national saving amounts to 1.25 million,then what is GDP?

Accepted Answer

In a closed economy, GDP (Y) is equal to the sum of consumption (C), investment (I), and government purchases (G). National saving is equal to investment in a closed economy, so we have Y = C + I + G. Given C = 8 million, G = 1.75 million, and national saving (I) = 1.25 million, GDP is 8 + 1.25 + 1.75 = 11 million.

Question 2

For a closed economy,GDP is $12 trillion,consumption is $7 trillion,taxes net of transfers are $3 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 $12 trillion,consumption...

Question 3

In a small closed economy investment is $50 billion and private saving is $45 billion.What are public saving and national saving?

Accepted Answer

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

Question 4

Suppose the economy is closed with national saving of $3 trillion,consumption of $10 trillion,and government purchases of $4 trillion.What is GDP?

Accepted Answer

In a closed economy, GDP (Y) is calculated as the sum of consumption (C), investment (I), and government purchases (G). National saving (S) is equal to investment (I) in a closed economy. Given S = $3 trillion, C = $10 trillion, and G = $4 trillion, GDP = C + I + G = $10 trillion + $3 trillion + $4 trillion = $17 trillion.

Question 5

Suppose that in a closed economy GDP is equal to 20,000,consumption equal to 15,000,government purchases equal 4,000 and taxes equal 3,000.What are private saving,public saving,and national saving?

Accepted Answer

Private saving is GDP - consumption - taxes = 20,000 - 15,000 - 3,000 = 2,000. Public saving is taxes - government purchases = 3,000 - 4,000 = -1,000. National saving is private saving + public saving = 2,000 - 1,000 = 1,000.

Question 6

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 lead to a decrease in private consumption (C), but since Y and G remain the same, national saving (S) would remain unchanged. However, public saving (T-G) would increase, leading to an increase in overall saving in the economy. Therefore, only public saving would increase, and the correct choice is D.

Question 7

In a closed economy,national saving is

Accepted Answer

In a closed economy, national saving is equal to investment. This is because any income not spent on consumption (saving) is either invested domestically or goes towards buying foreign assets (net exports). Therefore, national saving equals domestic investment plus net exports, which in a closed economy means national saving equals investment.

Question 8

Suppose that in a closed economy GDP is equal to 15,000,government purchases are equal to 3,000,consumption equals 10,500,and taxes equal 3,500.What are private saving and public saving?

Accepted Answer

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

Question 9

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 10

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

Accepted Answer

National saving in a closed economy is equal to the income (Y) minus consumption (C) minus government spending (G). Therefore, the expression Y - C - G must be equal to national saving. Option A includes net exports (NX), which is not a part of national saving for a closed economy, and option C only includes investment (I) and consumption (C), excluding government spending (G). Option D subtracts income (Y) from government spending (G) and consumption (C), which is not the correct formula for national saving.

Question 11

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

Accepted Answer

National savings is calculated as GDP - Consumption - Government Purchases. To make national savings equal to 2,000, Government Purchases must be 1,500 (11,000 - 7,500 - 1,500 = 2,000). With taxes at 500 and government purchases at 1,500, the government runs a deficit of 1,000 (500 - 1,500 = -1,000).

Question 12

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, which would lower private saving (saving by households and firms). However, the increase in taxes would increase government revenue, which would raise public saving (saving by the government). Therefore, private saving would decrease and public saving would increase, resulting in a lowering of private saving and raising of public saving.

Question 13

Which of the following equations represents GDP for a closed economy?

Accepted Answer

Option D represents GDP for a closed economy equation which states that GDP (Y) is equal to consumption (C) plus investment (I) plus government spending (G).

Question 14

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 lead to a decrease in disposable income and reduce private saving since people would have less money to save or spend. However, it would not affect national saving since it is the sum total of private and public saving. Therefore, national saving would remain unchanged while private saving would decrease.

Question 15

Suppose that in a closed economy GDP is equal to 11,000,taxes are equal to 1,000,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 16

When public saving falls by $2b and private saving falls by $1b in a closed economy,

Accepted Answer

In a closed economy, national saving equals investment. If public saving falls by $2b and private saving falls by $1b, total national saving falls by $3b, leading to a $3b decrease in investment.

Question 17

Suppose private saving in a closed economy is $12b and investment is $10b.

Accepted Answer

The answer of Suppose private saving in a closed economy...

Question 18

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 because it is the amount left over after government expenditures have been subtracted from tax revenue. This is a measure of how much the government is saving or borrowing.
- Y - T - C represents private saving because it is the amount of income that households have left over after paying taxes and consumption spending. This is a measure of how much households are saving or borrowing.

Therefore, the first expression represents public savings, while the second expression represents private savings.

Question 19

Suppose a closed economy had public saving of -$1 trillion and private saving of $3 trillion.What are national saving and investment for this country?

Accepted Answer

National saving is the sum of public and private saving. Here, national saving is $3 trillion (private) - $1 trillion (public) = $2 trillion. In a closed economy, national saving equals investment, so investment is also $2 trillion.

Question 20

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 because it includes net exports (NX) which is the difference between exports and imports. In an open economy, exports and imports affect overall economic activity and therefore should be included in the calculation of GDP.

Quiz 13: Saving Investment and the Financial System: Saving and Investment in the National Income Accounts