Deck 19: Saving, Capital Formation, and Financial Markets

Question 1

Chris earns $1,500 per week and spends $1,000 per week on living expenses,puts $200 in a savings account,and buys $300 worth of shares in a stock mutual fund.Chris's saving is _____,and Chris's saving rate is _____.

A)$200;13.3%
B)$200;20.0%
C)$300;20.0%
D)$500;33.3%

Answer 1

D

Question 2

Jordan has the following assets and liabilities: $$\begin{array} { l l r } \text { Two cars } & \$ 10,000 \\\text { House } & \$ 200,000 \\\text { Mortgage } & \$ 100,000 \\\text { Cash } & \$ 1,000 \\\text { Car loans } & \$ 3,000 \\\text { Checking account balance } & \$ 2,000 \\\text { Credit card balance } & \$ 1,000\end{array}$$
Jordan's wealth is _____,the value of Jordan's assets is _____,and the value of Jordan's liability is _____.

A)$107,000;$213,000;$100,000
B)$109,000;$213,000;$104,000
C)$111,000;$213,000;$100,000
D)$213,000;$317,000;$104,000

Answer 2

$109,000;$213,000;$104,000

Question 3

Liabilities are:

A)current income minus spending on current needs.
B)the debts one owes.
C)saving minus investment.
D)anything of value one owns.

Answer 3

B

Question 4

Assets are:

A)current income minus spending on current needs.
B)stocks,bonds,and credit card balances.
C)saving minus investment.
D)anything of value one owns.

Question 5

Wealth equals:

A)current income minus spending on current needs.
B)assets minus liabilities.
C)saving minus investment.
D)investment minus saving.

Question 6

Taylor has the following assets and liabilities: $$\begin{array} { l l r } \text { Two cars } & \$ 15,000 \\\text { House } & \$ 400,000 \\\text { Mortgage } & \$ 300,000 \\\text { Cash } & \$ 1,000 \\\text { Car loans } & \$ 5,000 \\\text { Checking account balance } & \$ 3,000 \\\text { Credit card balance } & \$ 3,000\end{array}$$
Suppose that Taylor receives a $10,000 bonus from her employer.If she puts that money toward her mortgage,her wealth would ______;if she puts that money in her checking account,her wealth would ______.

A)increase to $121,000;decrease to $101,000
B)increase to $115,000;decrease to $95,000
C)increase to $121,000;increase to $121,000
D)increase to $115,000;increase to $115,000

Question 7

The saving rate equals saving divided by:

A)wealth.
B)assets.
C)liabilities.
D)income.

Question 8

Pat earns $1,000 per week and spends $850 per week on living expenses,puts $50 in a savings account,and buys $100 worth of shares in a stock mutual fund.Pat's saving is _____,and Pat's saving rate is _____.

A)$50;5.0%
B)$50;5.9%
C)$100;10%
D)$150;15%

Question 9

A measure defined at a point in time is called a(n)______ variable.

A)stock
B)nominal
C)aggregate
D)flow

Question 10

Taylor has the following assets and liabilities: $$\begin{array} { l l r } \text { Two cars } & \$ 15,000 \\\text { House } & \$ 400,000 \\\text { Mortgage } & \$ 300,000 \\\text { Cash } & \$ 1,000 \\\text { Car loans } & \$ 5,000 \\\text { Checking account balance } & \$ 3,000 \\\text { Credit card balance } & \$ 3,000\end{array}$$
What is Taylor's wealth?

A)$105,000
B)$107,000
C)$111,000
D)$419,000

Question 11

Wealth is the same as:

A)net worth.
B)assets.
C)capital gains.
D)savings.

Question 12

Saving equals:

A)current spending minus current income.
B)wealth minus assets.
C)assets minus liabilities.
D)current income minus spending on current needs.

Question 13

A flow is a measure defined:

A)per unit of time.
B)at a point in time.
C)in real terms.
D)in nominal terms.

Question 14

Which of the following is an asset of a family?

A)Student loan
B)Mortgage
C)Unpaid credit card balance
D)Checking account balance

Question 15

Current income minus spending on current needs equals:

A)saving.
B)wealth.
C)transfers.
D)investment.

Question 16

Taylor has the following assets and liabilities: $$\begin{array} { l l r } \text { Two cars } & \$ 15,000 \\\text { House } & \$ 400,000 \\\text { Mortgage } & \$ 300,000 \\\text { Cash } & \$ 1,000 \\\text { Car loans } & \$ 5,000 \\\text { Checking account balance } & \$ 3,000 \\\text { Credit card balance } & \$ 3,000\end{array}$$
What is the value of Taylor's liabilities?

A)$300,000
B)$303,000
C)$308,000
D)$311,000

Question 17

Taylor has the following assets and liabilities: $$\begin{array} { l l r } \text { Two cars } & \$ 15,000 \\\text { House } & \$ 400,000 \\\text { Mortgage } & \$ 300,000 \\\text { Cash } & \$ 1,000 \\\text { Car loans } & \$ 5,000 \\\text { Checking account balance } & \$ 3,000 \\\text { Credit card balance } & \$ 3,000\end{array}$$
What is the value of Taylor's assets?

A)$308,000
B)$416,000
C)$419,000
D)$422,000

Question 18

Mo's current income is $100 more per month than his current consumption needs.He decides to use the $100 to reduce his credit card debt.As a result,his:

A)liabilities will decrease and his wealth will increase.
B)liabilities and his wealth will decrease.
C)assets will decrease and his wealth will increase.
D)assets and his wealth will increase.

Question 19

Which of the following is a liability of a family?

A)Checking account balance
B)Share of stock
C)House
D)Mortgage

Question 20

Jordan has the following assets and liabilities: $$\begin{array} { l l r } \text { Two cars } & \$ 10,000 \\\text { House } & \$ 200,000 \\\text { Mortgage } & \$ 100,000 \\\text { Cash } & \$ 1,000 \\\text { Car loans } & \$ 3,000 \\\text { Checking account balance } & \$ 2,000 \\\text { Credit card balance } & \$ 1,000\end{array}$$
Suppose that Jordan wins $100,000 in the lottery.If he uses that money to pay off his mortgage,his wealth would ______;if he puts that money in his checking account,his wealth would ______.

A)increase to $209,000;not change
B)not change;increase to $207,000
C)increase to $209,000;increase to $209,000
D)increase to $207,000;not change

Question 21

Steve takes $500 from his paycheck and uses it to purchase U.S.Savings Bonds.Based on this information:

A)Steve's saving has increased by $500.
B)Steve's saving has decreased by $500.
C)Steve has a capital gain of $500.
D)Steve's wealth is unchanged.

Question 22

The Boy Scouts have so far sold 100 tickets for their upcoming raffle,but they sell an additional 12 tickets every day.The ______ is a stock variable,and the ______ is a flow variable.

A)number of tickets sold each day;number of tickets sold so far
B)number of tickets sold so far;total number of tickets sold by the time of the raffle
C)number of tickets sold each day;total number of tickets available
D)total number of tickets sold by the time of the raffle;number of tickets sold each day

Question 23

Saving is a(n)______ and wealth is a(n)______.

A)stock;flow
B)flow;stock
C)asset;liability
D)liability;asset

Question 24

The stock of wealth increases more rapidly the faster the flow of ______.

A)income
B)saving
C)money
D)assets

Question 25

If Gerry saves $500 per month,then Gerry's ______ will increase by _____.

A)wealth;$500 only if he has no debt
B)income;$500 only if he buys additional assets
C)wealth;$500
D)wealth;$500 only if he buys additional assets

Question 26

National saving is saving by:

A)households for retirement.
B)the government.
C)households and firms.
D)the entire economy.

Question 27

Which of the following is a stock?

A)Saving
B)Income
C)Consumption
D)Wealth

Question 28

If Alex deposits $1,000 from her paycheck into her checking account and,at the same time,increases her credit card balance by $1,500,then her saving is ______,and her wealth ______.

A)+$1,000;decreases by $500
B)+$500;decreases by $1,000
C)-$500;increases by $2,500
D)-$500;decreases by $500

Question 29

Capital gains are ______,and capital losses are ______.

A)increases in the flow of investment;decreases in the flow of investment
B)increases in the flow of saving;decreases in the flow of saving
C)additions to plant and equipment;the destruction of plant and equipment
D)increases in the value of existing assets;decreases in the value of existing assets

Question 30

Elaine owns a beautiful diamond ring she purchased for $2,500.When she has it appraised she learns that it is now worth $3,000.Based on this information:

A)Elaine's saving this year has increased by $500.
B)Elaine's saving this year has decreased by $500.
C)Elaine has experienced a $500 capital gain.
D)Elaine's wealth is unchanged.

Question 31

The change in wealth during a period equals:

A)saving + capital gains - capital losses.
B)saving - capital gains + capital losses.
C)saving - investment + capital gains - capital losses.
D)public saving + private saving - transfers.

Question 32

Which of the following is a flow?

A)Saving
B)Wealth
C)Assets
D)Money

Question 33

If Alex uses $800 from her checking account to pay her credit card balance,her wealth:

A)increases by $800.
B)decreases by $800.
C)increases by $1,600.
D)does not change.

Question 34

High rates of saving today contribute to ______ in the future.

A)higher tax rates
B)more unemployment
C)a higher standard of living
D)more capital gains

Question 35

The large increase in household wealth in the United States in the 1990s was the result of:

A)a high saving rate.
B)a low saving rate.
C)large capital gains.
D)high rates of inflation.

Question 36

Steve uses $300 from his paycheck to pay off his credit card balance.Based on this information:

A)Steve's saving has increased by $300.
B)Steve's saving has decreased by $300.
C)Steve's wealth is unchanged.
D)Steve has a capital loss of $300.

Question 37

Jay owns a classic car he purchased for $50,000.At a car rally he is offered $75,000 for the car by a knowledgeable classic car enthusiast.Based on this information:

A)Jay's saving this year has increased by $25,000.
B)Jay's saving this year has decreased by $25,000.
C)Jay has experienced a $25,000 capital gain.
D)Jay's wealth is unchanged.

Question 38

The Boy Scouts have so far sold 100 tickets for their upcoming raffle,but they sell a constant additional 12 tickets every day.After three more days of selling tickets,the stock of tickets sold will be ____,and the flow of tickets sold will be ____.

A)136;12
B)36;12
C)100;36
D)136;36

Question 39

If Dylan saves $50 per week,then Dylan's ______ will increase by $50 per week.

A)investment
B)consumption
C)taxes
D)wealth

Question 40

Saving $100 will:

A)increase wealth by $100.
B)increase wealth by $100 only if the $100 is used to purchase an asset.
C)increase wealth by $100 only if the $100 is used to repay a debt.
D)decrease wealth by $100.

Question 41

The saving of the government sector is called ______ saving.

A)private
B)public
C)national
D)aggregate

Question 42

Where Y is GDP,C is consumption,I is investment,G is government spending,and there is no international trade,national saving equals:

A)C + I +G.
B)Y - C -G.
C)Y + C +G.
D)Y - C - I.

Question 43

A nation's saving equals its ______ income less its spending on _______.

A)real;investment
B)current;current needs
C)nominal;investment
D)nominal;net taxes

Question 44

Total taxes minus transfer payments minus government interest payments is called:

A)a budget surplus.
B)net taxes.
C)a budget deficit.
D)national saving.

Question 45

Social Security benefits,welfare payments,and farm support payments are examples of:

A)consumption spending.
B)public interest payments.
C)investment spending.
D)transfer payments.

Question 46

Public saving is:

A)increased when the government budget deficit rises.
B)identical to the government budget surplus.
C)less important to national saving than private saving.
D)more important to national saving than private saving.

Question 47

Where Y is GDP,C is consumption,I is investment,G is government spending,T is net taxes,and there is no international trade,the government budget deficit equals:

A)T -G
B)Y -G
C)Y + T -G
D)G - T.

Question 48

If net taxes paid by households increase:

A)private saving will decrease.
B)private saving will increase.
C)public saving will decrease.
D)transfer payments to households will decrease.

Question 49

Which of the following is correct?

A)National saving equals private saving plus public saving.
B)Public saving equals national saving plus private saving.
C)Private saving equals national saving plus public saving.
D)National saving equals public saving minus private saving.

Question 50

Payments by the government to the public for which the government receives no current goods or services in return are called:

A)public saving.
B)net taxes.
C)transfer payments.
D)capital losses.

Question 51

National saving is done by:

A)only households.
B)only businesses.
C)only governments.
D)households,businesses,and governments.

Question 52

The excess of government spending over tax collections is:

A)national income.
B)national saving.
C)national wealth.
D)the government budget deficit.

Question 53

An increase in net taxes (taxes paid by the private sector to the government less transfer payments and interest payments made by the government to the private sector)will:

A)increase private saving.
B)decrease public saving.
C)increase public saving.
D)reduce investment in new capital equipment.

Question 54

Saving by households and businesses is called ______ saving.

A)private
B)public
C)national
D)aggregate

Question 55

If total government tax collections equal $200 billion,transfer payments equal $75 billion,and government interest payments equal $10 billion,then net taxes equal:

A)$115 billion.
B)$125 billion.
C)$190 billion.
D)$275 billion.

Question 56

Public saving is positive when:

A)there is a government budget surplus.
B)after-tax income of households and businesses is less than consumption expenditures.
C)the government's budget is balanced.
D)after-tax income of households and businesses is greater than consumption expenditures.

Question 57

Public saving is negative when:

A)there is a government budget surplus.
B)there is a government budget deficit.
C)the government's budget is balanced.
D)after-tax income of households and businesses is greater than consumption expenditures.

Question 58

Where Y is GDP,C is consumption,I is investment,G is government spending,T is net taxes,and there is no international trade,private saving equals:

A)C + I + G - T.
B)Y - T -C
C)Y - T -G
D)Y - C - I.

Question 59

Where Y is GDP,C is consumption,I is investment,G is government spending,T is net taxes,and there is no international trade,public saving equals:

A)T -G
B)Y - T -C
C)Y + T -G
D)Y - C - T.

Question 60

Net taxes equal the amount that:

A)the government pays the private sector plus the amount of private sector pays the government.
B)the government pays the private sector minus the amount the private sector pays the government.
C)the business sector pays the government minus the amount the private sector pays the government.
D)the private sector pays the government minus the amount the private sector receives from the government.

Question 61

In the United States from 1960 to 2009,the largest positive contribution to national saving was from:

A)the public sector.
B)the government budget deficit.
C)business saving.
D)household saving.

Question 62

Which of the following contributed to the turn-around in the government budget from a surplus in the early 2000s to record deficits by the end of the decade?

A)An increase in household saving.
B)An increase in business saving.
C)An increase in tax revenues because of a recession.
D)An increase in government spending on homeland security and wars.

Question 63

The data below describe the economy of Econland: $\begin{array}{llcc} \text { Business and household saving } &58 \\ \text { Government transfers and interest payments } & 12\\ \text { Government purchases of goods and services } &25 \\ \text {Tax collections } &42 \\\end{array}$

Public saving in Econland equals:

A)-5
B)5
C)16
D)17

Question 64

If household saving decreases by $4 million,business saving increases by $4 million,and the government budget deficit decreases by $4 million,then private saving ______ and public saving ______.

A)increases;increases
B)increases;decreases
C)does not change;increases
D)does not change;decreases

Question 65

If government spending increases by $1 million while net taxes are unchanged,then:

A)public saving increases.
B)public saving decreases.
C)public saving does not change.
D)private saving increases.

Question 66

Saving for protection against unexpected setbacks-such as the loss of a job or a medical emergency-is called ______ saving.

A)public
B)bequest
C)precautionary
D)life-cycle

Question 67

Suppose the following information describes the economy: $$\begin{array} { l r } \text { Consumption } & 8000 \\\text { Investment } & 1,000 \\\text { Government purchases } & 1,000 \\\text { Net exports } & 0 \\\text { Government transfers and interest payments } & 500 \\\text { Government tax collections } & 1,700\end{array}$$
Private saving equals ____;public saving equals ______;national saving equals ____.

A)800;200;600
B)800;200;1,000
C)1,000;800;1,000
D)1,500;700;2,700

Question 68

From a macroeconomic perspective,the problem of low household saving has probably been overstated because:

A)household saving is not related at all to an economy's ability to accumulate new capital.
B)household saving has been increasing steadily over the last three decades.
C)it is national saving,not household saving,that allows an economy to accumulate new capital.
D)household saving represents a smaller share of national saving than does public saving.

Question 69

Based on the following information,what is the amount of public saving? $$\begin{array} { l c c } & \text { Receipts } & \text { Expenditures } \\\text { Federal Government } & 2,500 & 2,000 \\\text { State and Local Governments } & 1,200 & 1,500\end{array}$$

A)+3,700
B)+2,500
C)+200
D)-300

Question 70

By international standards,the household saving rate of the United States:

A)has not ever really been high.
B)was extremely high until the 1980s.
C)has always been very high.
D)was low through the 1970s and 1980s,but increased throughout the 1990s to become one of the highest.

Question 71

Household saving in the U.S.:

A)is low relative to previous periods,but approximately equal to the rate in other countries.
B)is low relative to other countries,but has increased during the 1990s.
C)had decreased since the 1960s,but,because the economy was so strong during the 1990s,has recently increased.
D)is low relative to other countries and has been declining since the mid-1980s.

Question 72

Saving to meet long-term objectives-such as retirement,college attendance,or to purchase a home,-is called ______ saving.

A)public
B)bequest
C)precautionary
D)life-cycle

Question 73

The three broad reasons for saving,as identified by economists,are reasons relating to:

A)consumption,investment,and exports.
B)national,public,and private production.
C)the life-cycle,precaution,and bequests.
D)capital gains,capital losses,and deficits.

Question 74

Private saving is positive when:

A)there is a government budget surplus.
B)there is a government budget deficit.
C)the government's budget is balanced.
D)after-tax income of households and businesses is greater than consumption expenditures.

Question 75

If consumption spending increases by $10 million with no changes in net taxes,then:

A)public saving increases.
B)public saving decreases.
C)private saving increases.
D)private saving decreases.

Question 76

When the government runs a budget deficit,it makes up the difference by:

A)issuing bonds.
B)paying down outstanding debt.
C)increasing transfer payments.
D)increasing public saving.

Question 77

Saving done for the purpose of leaving an inheritance is called ______ saving.

A)public
B)bequest
C)precautionary
D)life-cycle

Question 78

Suppose the following information describes the economy: $$\begin{array} { l r } \text { GDP } & 2,000 \\\text { Consumption } & 1,500 \\\text { Government spending } & 300 \\\text { Net taxes } & 400\end{array}$$
Private saving equals ____;public saving equals ______;national saving equals ____.

A)100;200;100
B)100;100;200
C)200;100;300
D)200;100;500

Question 79

If in the economy,business saving equals $240 billion,household saving equals $15 billion and government saving equals -$150 billion,what is the value of national saving?

A)$415 billion
B)$265 billion
C)$250 billion
D)$105 billion

Question 80

When the government runs a budget surplus,it uses the funds to:

A)issue bonds.
B)pay down outstanding debt.
C)decrease transfer payments.
D)decrease public saving.