Question 1

In an open economy government spending was $30 billion, consumption was $70 billion, taxes were $20 billion, GDP was $100 billion, and investment spending was $10 billion. As a result, there was:

Accepted Answer

The answer of In an open economy government spending was...

Question 2

The budget balance equals:

Accepted Answer

The budget balance is calculated as taxes minus government spending. This measures the difference between what the government collects in taxes and what it spends.

Question 3

Use the following to answer questions : 
-(Table: Investment Spending, Private Spending, and Capital Inflows) Northlandia has a _____, while Southlandia has a _____.

Accepted Answer

The answer of Use the following to answer questions :...

Question 4

Use the following to answer questions :
Scenario: A Small Economy
Suppose there is no trade and no government in a small economy. GDP is $25 trillion, and consumption spending is $18 trillion this year.
-(Scenario: A Small Economy) Look at the scenario A Small Economy. There is a new government and it imposes taxes on its citizens to spend on infrastructure. Taxes and government spending are both $2 trillion. What is the level of investment spending now?

Accepted Answer

Investment spending can be calculated using the following formula: 
Investment spending = GDP - Consumption spending - Government spending

Before the government was introduced, investment spending was: 
Investment spending = $25 trillion - $18 trillion - $0 = $7 trillion

After the government was introduced, investment spending becomes: 
Investment spending = $25 trillion - $18 trillion - $2 trillion = $5 trillion

Therefore, the answer is B) $5 trillion.

Question 5

Assume that I = S_Private + S_Government + (IM - X). Furthermore, let's say that imports are equal to exports. In this case, private savings:

Accepted Answer

If imports are equal to exports (IM=X), then the equation can be simplified to I = (S_Private + S_Government). This means that the total savings (private and government) equal investment (I). Therefore, private savings plus government savings are equal to investment, and the answer is D.

Question 6

Use the following to answer questions :
Scenario: A Small Economy
Suppose there is no trade and no government in a small economy. GDP is $25 trillion, and consumption spending is $18 trillion this year.
-(Scenario: A Small Economy) Look at the scenario A Small Economy. What is the level of private saving?

Accepted Answer

Private saving is the difference between income and consumption spending. In this scenario, consumption spending is $18 trillion, and GDP is $25 trillion, so private saving is $25 trillion - $18 trillion = $7 trillion. However, since there is no government, there is no public saving or debt.

Question 7

Capital inflow into a country is associated with:

Accepted Answer

Capital inflow into a country is often associated with imports exceeding exports, as the country needs to bring in capital from abroad to finance the purchase of goods and services from other countries.

Question 8

Capital inflow equals:

Accepted Answer

Capital inflow is the total inflow of foreign funds minus the total outflow of domestic funds. This includes both foreign direct investment and portfolio investment. Option A refers to the calculation of GDP and net exports, while option B refers to the change in capital stock and investment spending, which are not necessarily indicators of capital inflow. Option C refers specifically to foreign direct investment, which is only one component of capital inflow. Therefore, option D is the best choice as it provides a comprehensive understanding of capital inflow.

Question 9

Taxes equal:

Accepted Answer

Taxes represent the amount of money collected from individuals and businesses by the government based on their income, consumption, or other financial activities. This means that taxes are deducted from total income, and then the remaining amount can be used for consumption or private savings. Therefore, taxes can be calculated as total income minus consumption minus private savings.

Question 10

In an open economy, savings can come from all of the following EXCEPT:

Accepted Answer

Savings cannot come from consumption, as consumption is the opposite of saving. Savings can come from domestic or foreign sources, as well as from the government, which can save through budget surpluses or by investing in assets that generate future returns.

Question 11

Use the following to answer questions :
Scenario: A Small Economy
Suppose there is no trade and no government in a small economy. GDP is $25 trillion, and consumption spending is $18 trillion this year.
-(Scenario: A Small Economy) Look at the scenario A Small Economy. What is the level of investment spending?

Accepted Answer

Investment spending is calculated by subtracting consumption spending from GDP. So, investment spending in this scenario is:
Investment spending = GDP - Consumption spending
Investment spending = $25 trillion - $18 trillion
Investment spending = $7 trillion (Answer B)

Question 12

National savings equals:

Accepted Answer

National savings equals the sum of private savings and the government budget balance. Consumption spending is not included in the calculation of national savings. The trade balance is not directly related to national savings, and government spending is not necessarily equal to national savings since it does not take into account taxes.

Question 13

Net capital inflow equals:

Accepted Answer

Net capital inflow is the difference between the imports and exports of a country. It measures the net flow of capital into a country in the form of investments and financial transfers.

Question 14

Use the following to answer questions :
Scenario: Open Economy S = I
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.
-(Scenario: Open Economy S = I) Look at the scenario Open Economy S = I. How much is investment spending?

Accepted Answer

The answer of Use the following to answer questions :
Scenario:...

Question 15

Which statement is CORRECT?

Accepted Answer

The budget deficit is the amount by which government spending exceeds tax revenues. Therefore, the correct statement is D, "The budget deficit equals government spending minus tax revenues." Choice A is incorrect because transfer payments are a component of government spending, not tax revenues. Choice B is incorrect because it ignores the role of the budget deficit in government spending. Choice C is incorrect because it suggests that the budget deficit is a component of national savings, which is not accurate.

Question 16

If a country has a trade surplus, we can conclude that it also has:

Accepted Answer

A trade surplus indicates that a country exports more than it imports, leading to a net capital outflow as foreign buyers pay for the excess exports.

Question 17

Use the following to answer questions :
Scenario: A Small Economy
Suppose there is no trade and no government in a small economy. GDP is $25 trillion, and consumption spending is $18 trillion this year.
-(Scenario: A Small Economy) Look at the scenario A Small Economy. There is a new government, and it imposes taxes on its citizens to spend on infrastructure. Taxes and government spending are both $2 trillion. What is the level of private saving now?

Accepted Answer

The answer of Use the following to answer questions :
Scenario:...

Question 18

Capital inflow is:

Accepted Answer

Capital inflow refers to the net amount of funds flowing into a country from foreign sources. It includes foreign investment, foreign aid, and other forms of capital. Option B refers to capital outflow, which is the opposite of capital inflow. Option C is incorrect as it refers to the savings gap, not capital inflow. Option D refers to the balance of trade in physical goods, not capital inflow.

Question 19

Use the following to answer questions : 
-(Table: Investment Spending, Private Spending, and Capital Inflows) What is the budget balance as a percentage of GDP in Southlandia?

Accepted Answer

The budget balance is the difference between government revenues and expenditures. If not specified, it is assumed to be balanced, hence 0%.

Question 20

Use the following to answer questions : 
-(Table: Investment Spending, Private Spending, and Capital Inflows) Look at the table Investment Spending, Private Spending, and Capital Inflows. What is the budget balance as a percentage of GDP in Northlandia?

Accepted Answer

The answer of Use the following to answer questions :...

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

In an open economy government spending was $30 billion, consumption was $70 billion, taxes were $20 billion, GDP was $100 billion, and investment spending was $10 billion. As a result, there was:

The budget balance equals:

Use the following to answer questions : -(Table: Investment Spending, Private Spending, and Capital Inflows) Northlandia has a _, while Southlandia has a _.

Assume that I = S_Private + S_Government + (IM - X) . Furthermore, let's say that imports are equal to exports. In this case, private savings:

Capital inflow into a country is associated with:

Capital inflow equals:

Taxes equal:

In an open economy, savings can come from all of the following EXCEPT:

National savings equals:

Net capital inflow equals:

Which statement is CORRECT?

If a country has a trade surplus, we can conclude that it also has:

Capital inflow is:

Use the following to answer questions : -(Table: Investment Spending, Private Spending, and Capital Inflows) What is the budget balance as a percentage of GDP in Southlandia?

Use the following to answer questions : -(Table: Investment Spending, Private Spending, and Capital Inflows) Look at the table Investment Spending, Private Spending, and Capital Inflows. What is the budget balance as a percentage of GDP in Northlandia?

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

In an open economy government spending was $30 billion, consumption was $70 billion, taxes were $20 billion, GDP was $100 billion, and investment spending was $10 billion. As a result, there was:

The budget balance equals:

Use the following to answer questions : -(Table: Investment Spending, Private Spending, and Capital Inflows) Northlandia has a _____, while Southlandia has a _____.

Assume that I = SPrivate + SGovernment + (IM - X) . Furthermore, let's say that imports are equal to exports. In this case, private savings:

Capital inflow into a country is associated with:

Capital inflow equals:

Taxes equal:

In an open economy, savings can come from all of the following EXCEPT:

National savings equals:

Net capital inflow equals:

Which statement is CORRECT?

If a country has a trade surplus, we can conclude that it also has:

Capital inflow is:

Use the following to answer questions : -(Table: Investment Spending, Private Spending, and Capital Inflows) What is the budget balance as a percentage of GDP in Southlandia?

Use the following to answer questions : -(Table: Investment Spending, Private Spending, and Capital Inflows) Look at the table Investment Spending, Private Spending, and Capital Inflows. What is the budget balance as a percentage of GDP in Northlandia?

Use the following to answer questions : -(Table: Investment Spending, Private Spending, and Capital Inflows) Northlandia has a _, while Southlandia has a _.

Assume that I = S_Private + S_Government + (IM - X) . Furthermore, let's say that imports are equal to exports. In this case, private savings: