econ ch 8

In the small closed economy of San Lucretia, the currency is the denar. Statistics for last year show that private saving was 60 billion denars, taxes were 70 billion denars, government purchases of goods and services were 80 billion denars, there were no transfer payments by the government, and GDP was 400 billion denars. What were consumption and investment in San Lucretia? A. 270 billion denars, 50 billion denars B. 260 billion denars, 60 billion denars C. 250 billion denars, 70 billion denars D. None of the above is correct.

270 billion denars, 50 billion denars

If there is a surplus of loanable funds, then_____. A. the quantity of loanable funds supplied is greater than the quantity of loanable funds demanded and the interest rate is above equilibrium. B. the quantity of loanable funds demanded is greater than the quantity of loanable funds supplied and the interest rate is above equilibrium. C. the quantity of loanable funds demanded is greater than the quantity of loanable funds supplied and the interest rate is below equilibrium. D. the quantity of loanable funds supplied is greater than the quantity of loanable funds demanded and the interest rate is below equilibrium

A. the quantity of loanable funds supplied is greater than the quantity of loanable funds demanded and the interest rate is above equilibrium.

For an imaginary closed economy, T = $5,000; National saving = $11,000; Tr = 0; C = $50,000; and the government is running a budget deficit of $1,000. Then_____. A. private saving = $10,000 and GDP = $54,000. B. private saving = $10,000 and GDP = $58,000. C. private saving = $12,000 and GDP = $67,000. D. private saving = $12,000 and GDP = $72,000.

private saving = $12,000 and GDP = $67,000.

In national income accounting, we use which of the following pairs of terms interchangeably? A. "investment" and "private saving" B. "investment" and "purchases of stocks and bonds" C. "government saving" and "national saving" D. "public saving" and "government budget balance"

"public saving" and "government budget balance"

Which of the following statements is correct? A. Economists use the market for loanable funds as a model to show how savers and borrowers come together to determine the equilibrium rate of interest. B. The demand for loanable funds is downward sloping because investors respond to lower interest rates by increasing their quantity demanded of loanable funds. C. The supply of loanable funds is upward sloping because savers respond to lower interest rates by decreasing their quantity supplied of loanable funds. D. All of the above are correct.

All of the above are correct.

Which of the following events would result in higher equilibrium interest rate and greater equilibrium quantity of loanable funds? A. The supply of loanable funds shifted leftward. B. The demand for loanable funds shifted rightward. C. The demand for loanable funds shifted leftward. D. The supply of loanable funds shifted rightward.

B. The demand for loanable funds shifted rightward

Which of the following statements is correct? A. The total income in the economy that remains after paying for consumption and government purchases is called private saving. B. The sum of private saving and national saving is called public saving. C. For a closed economy, the sum of private saving and public saving must equal investment. D. For a closed economy, the sum of consumption, national saving, and taxes must equal GDP.

For a closed economy, the sum of private saving and public saving must equal investment.

Consider three different closed economies with the following national income statistics. Country A has taxes of $40 billion, transfers of $20 billion, and government expenditures on goods and services of $30 billion. County B has private savings of $60 billion, and investment expenditures of $50 billion. Country C has GDP of $300 billion, investment of $70, consumption of $180 billion, taxes of $60 billion and transfers of $20 billion. From this information we know that there is a $10 billion government budget deficit for_____. A. only country A and B. B. only country B and C. C. only country A and C. D. all three countries.

all three countries

Public saving is the_____. A. amount of income that households have left after paying for taxes and consumption. B. amount of income that businesses have left after paying for the factors of production. C. amount of tax revenue that the government has left after paying for its spending. D. sum of A), B), and C).

amount of tax revenue that the government has left after paying for its spending.

Use the following diagram to answer this question The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves. A shift of the demand curve from D1 to D2 is called______. A. a decrease in the demand for loanable funds. B. an increase in the quantity of loanable funds demanded. C. an increase in the demand for loanable funds. D. a decrease in the quantity of loanable funds demanded.

an increase in the demand for loanable funds.

Which of the following would necessarily create a surplus at the original equilibrium interest rate in the loanable funds market? A. an increase in the supply of or a decrease in the demand for loanable funds B. an increase in the supply of or an increase in the demand for loanable funds C. a decrease in the supply of or a decrease in the demand for loanable funds D. a decrease in the supply of or an increase in the demand for loanable funds

an increase in the supply of or a decrease in the demand for loanable funds

In which of the following cases would it necessarily be true that national saving and private saving are equal for a closed economy? A. Private saving is equal to government expenditures. B. The government's tax revenue is equal to its expenditures. C. Public saving is equal to investment. D. After paying their taxes and paying for their consumption, households have nothing left.

The government's tax revenue is equal to its expenditures.

Private saving is_____. A. the amount of income that households have left after paying for their taxes and consumption. B. the amount of income that businesses have left after paying for the factors of production. C. the amount of tax revenue that the government has left after paying for its spending. D. always equal to investment.

the amount of income that households have left after paying for their taxes and consumption.

Use the following diagram to answer this question Starting at point A, the enactment of an investment tax credit would likely cause_____. A. the equilibrium quantity of loanable funds to decrease to $75 and the equilibrium interest rate to fall to 5% (point B). B. the equilibrium quantity of loanable funds to decrease to $75 and the equilibrium interest rate to rise to 7% (point E). C. the equilibrium quantity of loanable funds to increase to $125 and the equilibrium interest rate to rise to 7% (point C). D. the equilibrium quantity of loanable funds to increase to $125 and the equilibrium interest rate to fall to 5% (point D).

the equilibrium quantity of loanable funds to increase to $125 and the equilibrium interest rate to rise to 7% (point C).

If the government institutes policies that increase incentives to save, then in the loanable funds market___. A. the demand for loanable funds shifts right. B. the demand for loanable funds shifts left. C. the supply of loanable funds shifts right. D. the supply of loanable funds shifts left.

the supply of loanable funds shifts right

Other things the same, a decrease in the interest rate_____. A. would shift the demand for loanable funds to the right. B. would shift the demand for loanable funds to the left. C. would increase the quantity of loanable funds demanded. D. would decrease the quantity of loanable funds demanded.

would increase the quantity of loanable funds demanded.

If in a closed economy GDP = $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

$8 trillion, G = $.5 trillion

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. Tr = 0. 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.

. 1,000, 500, and 1,500, respectively

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

. All of the above are correct.

Use the following diagram to answer this question Which of the following is not correct? A. The equilibrium real interest rate is 6 percent, and the equilibrium quantity of loanable funds is $1.6 trillion. B. At an interest rate of 8 percent, there is a surplus of loanable funds. C. At an interest rate of 4 percent, there is a shortage of loanable funds. D. At an interest rate of 4 percent, the quantity supplied of loanable funds equals $18 trillion.

. At an interest rate of 4 percent, the quantity supplied of loanable funds equals $18 trillion.

What would happen in the market for loanable funds if the government were to decrease the tax rate on interest income? A. The supply of and demand for loanable funds would shift right. B. The supply of and demand for loanable funds would shift left. C. The supply of loanable funds would shift right and the demand for loanable funds would shift left. D. None of the above is correct.

. None of the above is correct if the gov't were to decrease the tax rate on interest income, there would be an increase in the amount of loanable funds borrowed people would save more and be more willing to supply more funds the supply curve of LF would shift right the investment would increase but there will be no change in the demand for LF

Other things the same, a higher interest rate induces people to_____. A. save more, so the supply of loanable funds slopes upward. B. save less, so the supply of loanable funds slopes downward. C. invest more, so the supply of loanable funds slopes upward. D. invest less, so the supply of loanable funds slopes downward.

. save more, so the supply of loanable funds slopes upward.

Which of the following would a macroeconomist consider as investment? A. Charlie purchases a bond issued by Proctor and Gamble Corp. B. Karlee purchases stock issued by Texas Instruments, Inc. C. Mariah builds a new coffee shop. D. All of the above are correct.

Mariah builds a new coffee shop.

Use the following diagrams to answer this question Suppose the U.S. Congress decides to increase the tax rate on interest income. What effect will this policy have on the equilibrium interest rate and the equilibrium quantity of loanable funds? A. Panel (a) B. Panel (b) C. Panel (c) D. Panel (d)

Panel (d) (increase in tax rate on interest income decreases the supply of LF and shifts the supply curve to the left)

The savings-investment spending identity says that______. A. savings and investment spending are always equal for the economy as a whole. B. each person in the economy must invest as much as he or she saves. C. savings must equal government investment for the economy as a whole. D. each person in the economy must save as much as he or she invests.

savings and investment spending are always equal for the economy as a whole.