Question 1

If a U.S.citizen deposits $10,000 in a foreign bank,and the bank uses the $10,000 to buy assets in the U.S. ,then ________.
A)the U.S.has experienced a net capital outflow
B)the U.S.has experienced an increase in net exports
C)the foreign economy has experienced a net capital outflow
D)the foreign economy has experienced an increase in net exports
E)none of the above

Accepted Answer

E

Question 2

How can the U.S.federal government induce increases in the national saving rate?
A)by lowering the sales tax
B)by levying taxes on individual retirement (IRA)accounts
C)by reducing budget deficits
D)all of the above
E)none of the above

Accepted Answer

Reducing budget deficits can induce increases in the national saving rate by decreasing government spending and freeing up resources for private investment. Lowering the sales tax or levying taxes on IRA accounts may have the opposite effect by reducing disposable income and discouraging saving.

Question 3

How can the U.S.federal government induce increases in the national saving rate?
A)implementing a value added tax
B)lowering the capital gains tax
C)reducing budget deficits
D)all of the above
E)none of the above

Accepted Answer

All the options listed can potentially increase the national saving rate. Implementing a value-added tax can reduce consumption and increase savings. Lowering the capital gains tax can encourage investment and savings. Reducing budget deficits can increase national savings by reducing the amount the government borrows, leaving more savings available for investment.

Question 4

Private saving refers to ________.
A)disposable income minus consumption expenditure
B)total expenditure minus purchases of capital goods
C)taxes plus consumption minus income
D)consumption expenditure divided by disposable income
E)none of the above

Accepted Answer

Private saving is the amount of disposable income that is saved, which is calculated by subtracting consumption expenditure from disposable income. Therefore, option A (disposable income minus consumption expenditure) is the correct answer.

Question 5

Which of the four government policies to stimulate saving is essential? That is,which policy can on its own,regardless of the other policies,determine the level of the national saving rate?

Accepted Answer

The answer of Which of the four government policies to...

Question 6

Why is it important,for an open economy,that investment not be consistently higher than saving?

Accepted Answer

The answer of Why is it important,for an open economy,that...

Question 7

Private saving refers to ________.
A)after-tax income minus consumption expenditures
B)a flow variable which adds to the stock of wealth
C)the private saving rate times disposable income
D)all of the above
E)none of the above

Accepted Answer

Private saving is the difference between after-tax income and consumption expenditures, which makes Option A correct. Private saving is a flow variable that adds to the stock of wealth, which makes Option B correct. The private saving rate is the ratio of private saving to disposable income, which makes Option C correct. Therefore, the correct option is D, all of the above.

Question 8

Consumption expenditures are a function of ________.
A)the real interest rate
B)disposable income
C)autonomous consumption
D)all of the above
E)none of the above

Accepted Answer

Consumption expenditures are influenced by various factors including the real interest rate, which affects the cost of borrowing and saving; disposable income, which is the income available to households after taxes and transfers; and autonomous consumption, which is the consumption that occurs even when income is zero. Therefore, all of the options listed are correct.

Question 9

Net capital outflows ________.
A)are also known as net foreign investment
B)are positive if saving is greater than investment
C)are also known as the trade balance
D)all of the above
E)none of the above

Accepted Answer

The answer of Net capital outflows ________.
A)are also known as...

Question 10

The real interest rate ________.
A)is the cost of borrowing not adjusted for inflation
B)keeps the market for saving and consumption in equilibrium
C)describes the real benefit of saving
D)all of the above
E)none of the above

Accepted Answer

The answer of The real interest rate ________.
A)is the cost...

Question 11

When a U.S.firm sells a good abroad for,say,100 euros (assume $1=1euro),U.S.net exports increase by $100.These $100 in exports can be accounted for as $100 increase in capital outflow because ________.
A)if the 100 euros are kept in the foreign bank,the U.S.firm is giving a loan to that bank
B)if the U.S.firm uses the 100 euros to buy a share of stock in a foreign firm,the firm is supplying U.S.capital to that foreign firm
C)if the U.S.firm uses the proceeds to build a new factory in that country,it is supplying U.S.capital to that country
D)all of the above
E)none of the above

Accepted Answer

All the scenarios described in options A, B, and C involve the U.S. firm using the proceeds from the sale of goods abroad in ways that represent an outflow of capital from the U.S. to another country, thereby justifying the statement.

Question 12

In the model for desired saving,autonomous is roughly synonymous with ________.
A)policy-determined
B)endogenous
C)intended
D)inflation-adjusted
E)exogenous

Accepted Answer

Autonomous refers to factors that are external to the model and beyond the control of the individual or the economy, hence exogenous.

Question 13

A foreign bank receives a deposit of $10,000 from a U.S.citizen.As a result,there is a net capital outflow from the U.S. ,if ________.
A)the bank buys a U.S.-made computer
B)the bank buys a bond issued by a U.S.company
C)the bank keeps the $10,000 in a vault
D)all of the above
E)none of the above

Accepted Answer

The answer of A foreign bank receives a deposit of...

Question 14

Increases in ________ typically lead to decreases in consumption
A)the interest rate
B)disposable income
C)autonomous consumption
D)all of the above
E)none of the above

Accepted Answer

Increases in the interest rate typically lead to decreases in consumption because higher interest rates make saving more attractive than spending and borrowing more expensive, thus reducing consumers' willingness or ability to consume.

Question 15

Government saving refers to ________.
A)tax revenues minus transfers minus government consumption minus government investment
B)the government's tax receipts minus its outlays
C)national saving minus private saving
D)all of the above
E)none of the above

Accepted Answer

The answer of Government saving refers to ________.
A)tax revenues minus...

Question 16

When a U.S.firm sells a good abroad for,say,100 euros (assume $1.5=1euro),U.S.net exports increase by $150.These $150 in exports can be accounted for as $150 increase in capital outflow because ________.
A)private consumption in the foreign country increases by $150
B)if the U.S.firm uses the 100 euros to buy a share of stock in a foreign firm,the firm is supplying U.S.capital to that foreign firm
C)if the U.S.firm uses the proceeds to buy a U.S.bond,capital investment in the foreign country has increased
D)all of the above
E)none of the above

Accepted Answer

When a U.S. firm sells goods abroad, it receives payment in the form of foreign currency (in this case, 100 euros). If the firm uses those euros to buy a share of stock in a foreign firm, it is essentially providing capital to that foreign firm. This qualifies as a capital outflow for the U.S. and would increase U.S. net exports by $150. Neither private consumption nor buying U.S. bonds are directly related to the act of selling goods abroad, and thus do not apply to this scenario. Therefore, the best choice is B.

Question 17

The real interest rate ________.
A)is the cost of borrowing adjusted for inflation
B)keeps the market for saving and investment in equilibrium
C)describes the real benefit of saving
D)all of the above
E)none of the above

Accepted Answer

The real interest rate factors in the cost of borrowing and adjusts for inflation, which keeps the market for saving and investment in equilibrium. It also describes the real benefit of saving, as it accounts for inflation and ensures that the return on savings is greater than the rate of inflation.

Question 18

Which of the following is a correct statement?
A)Wealth can increase even if there is no saving.
B)An increase in net foreign assets always increases wealth.
C)Low U.S.national saving is the principal cause of the trade deficits the U.S.has run since the 1980s.
D)The U.S will be a net debtor nation for the foreseeable future.
E)all of the above

Accepted Answer

All statements are correct. Wealth can increase without saving through asset appreciation. An increase in net foreign assets does increase a nation's wealth. Low U.S. national saving has been a significant factor in the trade deficits since the 1980s. Given current trends, it is likely the U.S. will remain a net debtor nation for the foreseeable future.

Question 19

Government saving refers to ________.
A)tax revenues minus transfers minus government purchases
B)tax revenues plus transfers minus government consumption
C)the saving rate times transfers
D)national plus private saving
E)none of the above

Accepted Answer

Government saving is defined as tax revenues minus transfers minus government purchases. This calculation reflects the portion of government income that is not spent on either transfers (such as social security payments) or direct purchases of goods and services.

Question 20

Increases in ________ typically lead to decreases in private saving.
A)the interest rate
B)disposable income
C)autonomous consumption
D)all of the above
E)none of the above

Accepted Answer

The answer of Increases in ________ typically lead to decreases...

Quiz 4: Saving and Investment in Closed and Open Economies

If a U.S.citizen deposits $10,000 in a foreign bank,and the bank uses the $10,000 to buy assets in the U.S. ,then ________.

How can the U.S.federal government induce increases in the national saving rate?

How can the U.S.federal government induce increases in the national saving rate?

Private saving refers to ________.

Which of the four government policies to stimulate saving is essential? That is,which policy can on its own,regardless of the other policies,determine the level of the national saving rate?

Why is it important,for an open economy,that investment not be consistently higher than saving?

Private saving refers to ________.

Consumption expenditures are a function of ________.

Net capital outflows ________.

The real interest rate ________.

When a U.S.firm sells a good abroad for,say,100 euros (assume $1=1euro) ,U.S.net exports increase by $100.These $100 in exports can be accounted for as $100 increase in capital outflow because ________.

In the model for desired saving,autonomous is roughly synonymous with ________.

A foreign bank receives a deposit of $10,000 from a U.S.citizen.As a result,there is a net capital outflow from the U.S. ,if ________.

Increases in ________ typically lead to decreases in consumption

Government saving refers to ________.

When a U.S.firm sells a good abroad for,say,100 euros (assume $1.5=1euro) ,U.S.net exports increase by $150.These $150 in exports can be accounted for as $150 increase in capital outflow because ________.

The real interest rate ________.

Which of the following is a correct statement?

Government saving refers to ________.

Increases in ________ typically lead to decreases in private saving.