Econ Section 8.2

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Y = C + I + G represents GDP in a closed economy, whereas Y = C + I + G + NX represents GDP in an open economy. (True/False)

True

In a small closed economy investment is $55 billion and private saving is $50 billion. What are public saving and national saving? a) public saving is $5 billion, and national saving is $55 billion b) public saving is -$5 billion, and national saving is $45 billion c) public saving is $5 billion, and national saving is $45 billion d) public saving is -$5 billion and national saving is $50 billion

a) public saving is $5 billion, and national saving is $55 billion

In a closed economy GDP is Y=$100,000, government purchases are G=$25,000, and consumption C=$15,000. In this economy investment amounts to a) $72,000 b) $60,000 c) $40,000 d) $85,000

b) $60,000

Which of the following must be true for an economy in which S=I? a) saving exceeds investment b) S=Y-C-G c) investment exceeds saving d) this is an open economy

b) S=Y-C-G

By definition, a closed economy a) does not allow financial intermediation b) does not trade with other economies c) engages in international borrowing and lending d) is centrally-planned

b) does not trade with other economies

Which of the following must be true if Y = (C+I+G)? a) Y - C - G > I b) net exports (NX) are zero c) national saving is less than investment (S < I) d) national saving is zero

b) net exports (NX) are zero

Consider a closed economy with a government deficit and positive investment. Which of the following is correct? a) Private saving is negative; public saving is positive b) private saving is positive; public saving is negative c) private and public saving are both positive d) both private saving and public saving are negative

b) private saving is positive; public saving is negative

Which of the following must be true if S=(Y-C-G)? a) in such an economy, saving exceeds investment b) such an economy is closed c) in such an economy, investment exceeds saving d) such an economy is open

b) such an economy is closed

In a closed economy, GDP is $12 trillion, consumption is $7 trillion, taxes net of transfers are $3 trillion and the government runs a deficit of $1 trillion. What are private saving and national saving? a) $5 trillion and $3 trillion b) $5 trillion and $1 trillion c) $2 trillion and $1 trillion d) $2 trillion and $3 trillion

c) $2 trillion and $1 trillion

Consider a closed economy, in which S=(Y-T-C)+(T-G) holds. What does this identity imply if the government's tax revenue is equal to its expenditures? a) after paying their taxes and paying for their consumption, households have nothing left b) private saving is equal to government expenditures c) national saving and private saving are equal d) public saving is equal to investment

c) national saving and private saving are equal

Suppose a closed economy has public saving of -$1 trillion and private saving of $3 trillion. What are national saving and investment for this country? a) national saving is $3 trillion, investment is $3 trillion b) national saving is $2 trillion, investment is $3 trillion c) national saving is $2 trillion, investment is $2 trillion d) national saving is $4 trillion, investment is $2 trillion.

c) national saving is $2 trillion, investment is $2 trillion

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) national savings is $3 trillion and investment is $3 trillion b) national savings is $2 trillion and investment is $3 trillion c) national savings is $2 trillion and investment is $2 trillion d) national savings is $4 trillion and investment is $2 trillion

c) national savings is $2 trillion and investment is $2 trillion

In a small closed economy investment is $50 billion and private saving is $45 billion. What are public saving and national saving? a) public saving is -$5 billion, and national saving is $50 billion b) public saving is $5 billion and national saving is $45 billion c) public saving is $5 billion and national saving is $50 billion d) public saving is -$5 billion, and national saving is $45 billion

c) public saving is $5 billion, and national saving is $50 billion

According to the definitions or private and public saving, if Y, C, and G remained the same, a decrease in taxes would a) raise public saving and reduce public saving b) reduce both private and public saving c) reduce public saving and raise private saving d) raise both private saving and public saving

c) reduce public saving and raise private saving

The assumption of a closed economy applies to the world economy. (True/False)

True

Which of the following is consistent with the fact that national saving in a closed economy is positive? a) Y - C - G > 0 b) Y - C - G = 0 c) Y - C - G < 0 d) Y- C < G

a) Y - C - G > 0

Consider a closed economy, in which S=(Y-T-C)+(T-G). In this identity, what does (Y-T-C) represent? a) private saving b) national saving c) public saving d) investment

a) private saving

Consider a closed economy, in which S=(Y-T-C)+(T-G). In this identity, what does (T-G) represent? a) public saving b) national saving c) private saving d) investment

a) public saving

Consider a closed economy with national saving of $3 trillion, consumption of $10 trillion, and government purchases of $4 trillion. What is the economy's GDP? a) $3 trillion b) $9 trillion c) $17 trillion d) $11 trillion

c) $17 trillion

Which of the following is consistent with the fact that national saving in a closed economy is negative? a) Y - C - G > 0 b) Y - C - G = 0 c) Y - C - G < 0 d) Y - C > G

c) Y - C - G < 0

A closed economy does not engage in international trade of goods and services but it does engage in international borrowing or lending (True/False)

False

People whose consumption exceeds their income are savers. (True/False)

False

Purchases of capital goods are excluded from GDP. (True/False)

False


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