Macro econ exam 2 chp. 13

Suppose that in a closed economy GDP is equal to 20,000, consumption equal to 15,000, government purchases equal 4,000, and taxes equal 3,000. What are private saving, public saving, and national saving?

2,000, −1,000, and 1,000, respectively.

Which of the following would necessarily create a surplus at the original equilibrium interest rate in the loanable funds market?

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

Which of the following is a certificate of indebtedness?

Bonds but not stocks

Assume the bonds below have the same term and principal and that the state or local government that issues the municipal bond has a good credit rating. Which list has bonds correctly ordered from the one that pays the highest interest rate to the one that pays the lowest interest rate?

Corporate bond, U.S. government bond, municipal bond

In a closed economy, if Y and T remained the same, but G rose and C fell but by less than the rise in G, what would happen to public and national saving?

Public and national saving would fall.

For an open economy, the equation Y = C + I + G + NX is an identity. If we define national saving, S, as the total income in the economy that is left after paying for consumption and government purchases, then for an open economy, it is true that

S = I + NX.

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

The first of these is public saving; the second one is private saving.

Which of the following could explain an increase in the equilibrium interest rate and a decrease in the equilibrium quantity of loanable funds?

The supply of loanable funds shifted left.

Suppose a closed economy had public saving of −$1 trillion and private saving of $3 trillion. What are national saving and investment for this country?

c. $2 trillion, $2 trillion

A budget deficit

changes the supply of loanable funds.

If the supply of loanable funds shifts to the right, then the equilibrium interest rate

falls and the quantity of loanable funds rises.

Other things the same, when the interest rate rises, people would want to lend

more, making the quantity of loanable funds supplied increase.

The slope of the supply of loanable funds curve represents the

positive relation between the interest rate and saving

As an alternative to selling shares of stock as a means of raising funds, a large company could, instead,

sell bonds

In a closed economy, public saving is the amount of

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

National saving is

the total income in the economy that remains after paying for consumption and government purchases.