Question 1

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?
A)1,500 and -500, respectively
B)1,500 and 500, respectively
C)1,000 and -500, respectively
D)1,000 and 500, respectively

Accepted Answer

Private saving is calculated as GDP - Taxes - Consumption, which is 11,000 - 2,500 - 7,000 = 1,500. Public saving is calculated as Taxes - Government Purchases, which is 2,500 - 3,000 = -500.

Question 2

Which of the following expressions must be equal to national saving for a closed economy?
A)Y - I - G - NX
B)Y - C - G
C)Y - I - C
D)G + C - Y

Accepted Answer

National saving for a closed economy is equal to Y - C - G, as it represents the income (Y) that is not consumed (C) or spent by the government (G). Option A includes net exports (NX) which is not necessarily equal to national saving in a closed economy. Option C only includes investment (I) and consumption (C) but not government spending (G), which is a part of national saving. Option D includes government spending (G), but does not include consumption (C) or investment (I), which are also components of national saving.

Question 3

If in a closed economy Y = $11 trillion, which of the following combinations would be consistent with national saving of $2.5 trillion?
A)C = $8 trillion, G = $.5 trillion
B)C = $6.5 trillion, G = $3 trillion
C)C = $8.5 trillion, G = $2 trillion
D)C = $9 trillion, G = $.5 trillion

Accepted Answer

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

Question 4

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?
A)9,500
B)10,000
C)10,500
D)11,000

Accepted Answer

GDP = Consumption + Government Purchases + (National Saving - Taxes)= 6,500 + 2,000 + (1,000 - 1,500)= 6,500 + 2,000 + (-500)= 8,000

Question 5

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?
A)1,500, 1,000, and 500, respectively
B)1,000, 500, and 1,500, respectively
C)500, 1,500, and 1,000, respectively
D)None of the above is correct.

Accepted Answer

Private saving is GDP - Taxes - Consumption = 11,000 - 2,500 - 7,500 = 1,000. Public saving is Taxes - Government Purchases = 2,500 - 2,000 = 500. National saving is Private saving + Public saving = 1,000 + 500 = 1,500.

Question 6

Consider the expressions T - G and Y - T - C. Which of the following statements is correct?
A)Each one of these is equal to national saving.
B)Each one of these is equal to public saving.
C)The first of these is private saving; the second one is public saving.
D)The first of these is public saving; the second one is private saving.

Accepted Answer

- T - G represents government saving, which is sometimes referred to as public saving. It measures the difference between tax revenue (T) and government spending (G). When T exceeds G, the government is said to run a budget surplus, indicating that it is saving money. When G exceeds T, the government is said to run a budget deficit, indicating that it is borrowing money.
- Y - T - C represents private saving, which is sometimes referred to as household saving. It measures the difference between disposable income (Y - T) and consumption (C). When disposable income exceeds consumption, households are said to be saving money. When consumption exceeds disposable income, households are said to be borrowing money. 
- Therefore, the statement that the first expression (T - G) is public saving and the second expression (Y - T - C) is private saving is correct. The statement that each one of these is equal to national saving or public saving alone is not correct.

Question 7

According to the definitions of national saving and private saving, if Y, C, and G remained the same, an increase in taxes would
A)raise both national saving and private saving.
B)raise national saving and reduce private saving.
C)leave national saving and private saving unchanged.
D)leave national saving unchanged and reduce private saving.

Accepted Answer

An increase in taxes would reduce disposable income (Y - T) for households, resulting in a decrease in consumption (C). This would lead to a decrease in private saving since private saving is equal to disposable income minus consumption (S = Y - T - C). National saving is equal to the sum of private saving and public saving (S = (Y - T - C) + (T - G)), so if C and G remain the same, an increase in taxes would not affect national saving. However, since private saving would decrease, the correct choice is D.

Question 8

Suppose the economy is closed with national saving of $2 trillion, consumption of $8 trillion, and government purchases of $1 trillion. What is GDP?
A)$8 trillion
B)$9 trillion
C)$10 trillion
D)$11 trillion

Accepted Answer

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

Question 9

In a closed economy, national saving is
A)usually greater than investment.
B)equal to investment.
C)usually less than investment because of the leakage of taxes.
D)always less than investment.

Accepted Answer

In a closed economy, national saving (S) is equal to investment (I) because any money not consumed by households is saved and then used for investment. This is shown by the equation S=I. Choices A, C, and D are incorrect because they do not reflect the equal relationship between national saving and investment.

Question 10

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?
A)$4 trillion and $1 trillion, respectively
B)$4 trillion and $5 trillion, respectively
C)$1 trillion and $2 trillion, respectively
D)$1 trillion and $1 trillion, respectively

Accepted Answer

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

Question 11

Which of the following equations represents GDP for a closed economy?
A)Y = C + I + G + T
B)S = I - G
C)I = Y - C + G
D)Y = C + I + G

Accepted Answer

Option D is the correct equation that represents GDP in a closed economy, where Y stands for Gross Domestic Product, C for consumption, I for investment, and G for government spending. In a closed economy, there is no international trade, so there are no taxes (T) or net exports (NX) to consider.

Question 12

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?
A)-500
B)0
C)2,000
D)None of the above is correct.

Accepted Answer

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

Question 13

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?
A)$6 trillion, $6 trillion
B)$6 trillion, $2 trillion
C)$1 trillion, $4 trillion
D)$2 trillion, $2 trillion

Accepted Answer

In a closed economy, national saving is the sum of public and private saving. Therefore, national saving is $2 trillion (public) + $4 trillion (private) = $6 trillion. In a closed economy, national saving equals investment, so investment is also $6 trillion.

Question 14

In a small closed economy investment is $50 billion and private saving is $55 billion. What are public saving and national saving?
A)$60 billion and $5 billion
B)$50 billion and -$5 billion
C)$5 billion and $60 billion
D)-$5 billion and $50 billion

Accepted Answer

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

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?
A)$4 trillion and $1 trillion, respectively
B)$4 trillion and $-1 trillion, respectively
C)$2 trillion and $1 trillion, respectively
D)$2 trillion and $-1 trillion, respectively

Accepted Answer

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

Question 16

According to the definitions of private and public saving, if Y, C, and G remained the same, an increase in taxes would
A)raise both private and public saving.
B)raise private saving and lower public saving.
C)lower private saving and raise public saving.
D)lower private and public saving.

Accepted Answer

An increase in taxes would lead to a decrease in disposable income, which would lead to a decrease in consumption (C). As Y and G remain the same, the decrease in consumption (C) would result in an increase in national saving, which is equal to the sum of private saving (S private) and public saving (S public). However, since taxes are a part of government revenues, an increase in taxes would lead to an increase in government saving (S public), thus raising public saving. This increase in public saving would more than offset the decrease in private saving, resulting in an overall increase in national saving. Therefore, private saving would decrease and public saving would increase.

Question 17

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?
A)2,500, deficit
B)2,500, surplus
C)1,000, deficit
D)1,000, surplus

Accepted Answer

National savings = GDP - consumption - taxes

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

Therefore, investment + government purchases = 1,000

Let's assume investment is fixed at 1,500. Then, government purchases would need to be:

1,000 - 1,500 = -500

This means that the government would have a deficit of 500. Therefore, the only option that meets the criteria of national savings being 1,000 and the government having a deficit is option A, where government purchases is 2,500.

Question 18

According to the definitions of national saving and public saving, if Y, C, and G remained the same, an increase in taxes would
A)raise national saving and public saving.
B)raise national saving and raise public saving.
C)leave national saving and public saving unchanged.
D)leave national saving unchanged and raise public saving.

Accepted Answer

An increase in taxes would decrease private saving (Y-C-T) but increase public saving (T-G). Since national saving is the sum of private and public saving, it would remain unchanged. Therefore, choice D is the correct answer as it states an increase in taxes would leave national saving unchanged and raise public saving.

Question 19

In a closed economy, national saving equals
A)investment.
B)income minus the sum of consumption and government purchases.
C)private saving plus public saving.
D)All of the above are correct.

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 20

Which of the following equations represents GDP for an open economy?
A)Y = C + I + G + NX
B)NX = I - G
C)I = Y - C + G + NX
D)Y = C + I + G

Accepted Answer

GDP for an open economy includes net exports (NX), which is not included in the other options. Therefore, option A is the correct equation for GDP in an open economy.

Option B is simply an equation for net exports. 
Option C rearranges the standard equation for GDP to solve for investment (I).
Option D is the standard equation for GDP in a closed economy where there are no net exports.

Quiz 13: Saving, Investment, and the Financial System

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?

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

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

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?

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?

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

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

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

In a closed economy, national saving is

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?

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

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?

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

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?

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

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?

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

In a closed economy, national saving equals

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