chap 13

d

In a closed economy, private saving, , is equal to A) I - (G - T). B) I + (G - T) + C. C) I + (G + T). D) I + (G - T). E) I - (G + T).

c

Ricardian equivalence argues that when the government cuts taxes and raises its deficit, A) consumers anticipate that the low tax rates will continue. B) consumers anticipate that they will face lower taxes later to pay for the resulting government debt. C) consumers anticipate that they will face higher taxes later to pay for the resulting government debt. D) consumers anticipate it will affect their future taxes, in general in the direction of lowering future taxes. E) consumers anticipate that they will higher services from the government

d

In an open economy, private saving, , is equal to A) I + CA - (G - T). B) I - CA + (G - T). C) I - CA - (G - T). D) I + CA + (G - T). E) I + CA + (G + T).

e

The CA is equal to A) Y + (C - I - G). B)Y - (C + I - G). C) Y + (C + I + G). D) Y - (C + I + G). E) Y - (C - I + G).

d

The United States began to report its gross domestic product (GDP) only since A) 1931. B) 1900. C) 1941. D)1991 E) 1921.

a

. Ricardian equivalence argues that when the government A) cuts taxes and raises its deficit, consumers anticipate that they will face higher taxes later to pay for the resulting government debt, thus people will raise their own private saving to offset the fall in government saving. B) cuts taxes and raises its deficit, consumers anticipate that they will face lower taxes later to pay for the resulting government debt, thus people will raise their own private saving to offset the fall in government saving. C) cuts taxes and raises its surplus, consumers anticipate that they will face higher taxes later to pay for the resulting government debt, thus people will raise their own private saving to offset the fall in government saving. D) increases taxes and raises its deficit, consumers anticipate that they will face higher taxes later to pay for the resulting government debt, thus people will raise their own private saving to offset the fall in government saving. E) cuts taxes and decreases its deficit, consumers anticipate that they will face higher taxes later to pay for the resulting government debt, thus people will raise their own private saving to offset the fall in government saving.

a

For open economies, A) S = I + CA. B) S = I - CA. C) S = I. D) S < I + CA. E) S > I + CA.

c

Movements in GDP A) and GNP usually do not differ greatly. B) are inversely proportional to movements in GNP. C) and GNP usually do not differ greatly, as a practical matter. D) are usually smaller than those of GNP movements, in practice. E) and GNP usually do differ greatly.

b

You travel to Paris and pay for a $100 dinner with your credit card. How is this accounted for in the balance of payments? A) financial account, French asset export B)financial account, U.S. asset export C) current account, French service import D) financial account, U.S. asset import E) current account, U.S. good export

b

A U.S. citizen buys a newly issued share of stock in England, paying for his order with a check, which the British company deposits in its own U.S. bank account in New York. How is this transaction accounted for in the balance of payments? A) financial account, U.S. asset import B) financial account, U.S. asset export C) current account, U.S. service import D) financial account, British asset import E) current account, British good export

d

A closed economy A) can save by avoiding excessive imports. B) can save either by building up its capital stock or by acquiring foreign wealth. C) can save only by acquiring foreign wealth. D)can save only by building up its capital stock. E)cannot save either by building up its capital stock or by acquiring foreign wealth.

d

A country's current account A) balance equals the change in its foreign wealth. B) balance equals its GNP. C) deficit equals the change in its foreign wealth. D) balance equals the change in its net foreign wealth. E) surplus equals the change in its foreign wealth

d

A country's gross national product (GNP) is A) the value of all final goods produced by its factors of production and sold on the market in a given time period. B) the value of all final goods and services produced by its factors of production, excluding land, and sold on the market in a given time period. C) the value of all final goods and services produced by its factors of production and sold on the market. D) the value of all final goods and services produced by its factors of production and sold on the market in a given time period. E) the value of all intermediate goods and services produced by its factors of production and sold on the market in a given time period.

e

An American buys a Japanese car, paying by writing a check on an account with a bank in New York. How would this be accounted for in the balance of payments? A) current account, a Japanese good import B) financial account, a U.S. asset export C) current account, a U.S. good import D) financial account, a U.S. asset import E) a current account as a U.S. good import and a financial account, a U.S. asset export

b

An example of how GNP accounts for services provided by foreign-owned capital (and GDP does not) is A) earnings of a Spanish factory with British owners counts only in Britain's GNP. B) earnings of a Spanish factory counts in Spain's GDP but are part of Britain's GNP. C) earnings of a Spanish factory counts in Spain's GNP but are part of Britain's GDP. D) earnings of a Spanish factory with British owners counts only in Spain's GDP. E) earnings of a Spanish factory counts in Spain's GNP but not in Britain's GDP or GNP.

d

An open economy A) cannot save either by building up its capital stock or by acquiring foreign wealth. B) can save by avoiding excessive imports. C) can save only by acquiring foreign wealth. D) can save either by building up its capital stock or by acquiring foreign wealth. E) can save only by building up its capital stock.

a

Disposable income is National income A) less net taxes collected from households and firms by the government. B) less net taxes collected from households by the government. C) less net taxes collected from firms by the government. D) less taxes collected from households and firms by the government. E) plus net taxes collected from households and firms by the government.

e

Every international transaction automatically enters the balance of payments A)twice, both times as debit. B)once as a credit. C) once either as a credit or as a debit. D) the times, once as a credit, onces as a debit, and once as an exchange. E) twice, once as a credit and once as a debit.

c

For most macroeconomists A) gross national product is much more important than gross national income. B) it is hard to tell whether gross national income equal gross national product. C) gross national income and gross national product are the same. D) gross national product exceeds gross national product. E) gross national income exceeds gross national product.

a

For most macroeconomists A) national income accounts and national output accounts are equal to each other. B) national income accounts exceed national output accounts. C)it is impossible to tell whether national income accounts equal to national output accounts. D) national income accounts is much more important than national output accounts. E) national output accounts exceed national income accounts.

a

GDP is different than GNP in that A) it does not account for a country's production using services with foreign-owned capital. B) it does not account for indirect business taxes. C) it is unhelpful when tracking national income. D) it accounts for net unilateral transfers. E) it accounts for depreciation

d

GDP is supposed to measure A) the volume of production of a country's output. B) net unilateral transfers from foreigners. C) the volume of services generated within a country's borders. D) the volume of production within a country's borders. E) GNP plus depreciation.

c

GNP equals GDP A) minus receipts of factor income from the rest of the world. B) plus receipts of factor income from the rest of the world. C) plus net receipts of factor income from the rest of the world. D) minus depreciation. E) minus net receipts of factor income from the rest of the world.

b

Government purchases currently take up about A) 18 percent of U.S. GNP, and this share has been decreasing since the late 1950s. B) 20 percent of U.S. GNP, and this share has not changed much since the late 1950s. C) 25 percent of U.S. GNP, and this share has been decreasing since the late 1950s. D) 38 percent of U.S. GNP, and this share has not changed much since the late 1950s. E) 18 percent of U.S. GNP, and this share has been increasing since the late 1950s.

d

Government savings, , is equal to A) T + G - I. B)T + G. C)T = G. D) T - G. E) T - G = I.

d

Government transfer payments like social security and unemployment benefits are A) included in government purchases. B) not included in government purchases, but they are part of the investment component of GNP. C) not included in government purchases, but they are included in the consumption component of GNP. D) not included in government purchases. E) included in government purchases but not in the GNP.

c

How do we allocate statistical discrepancy among the current, capital, and financial accounts? A) Depend on the degree of certainty by which we attribute to these accounts. B) Depend on the convention adopted by the specific financial institution. C) We have no way of knowing exactly how to allocate this discrepancy. D) Divide it evenly amongst the three accounts. E) Statistical discrepancy signals human errors made when dealing with financial accounts.

e

In 1929, government purchases accounted for A) only 18.5 percent of U.S. GNP. B) 28.5 percent of U.S. GNP. C) 48.5 percent of U.S. GNP. D) 38.5 percent of U.S. GNP. E) only 8.5 percent of U.S. GNP.

d

In 2006, the United States had A) a balance in the current account. B) a surplus in the current account. C) From 2006 data, it is too difficult to determine whether a surplus or a deficit existed in the current account. D) a deficit in the current account. E) a positive balance of net financial flows.

a

In a closed economy, national saving A) always equals investment. B) is always more than investment. C) is always less than investment. D) sometimes equals investment. E) is never equal to investment

b

In open economies A) as in a closed economy, saving and investment are not necessarily equal. B) saving and investment are not necessarily equal as they are in a closed economy. C) investment always refers to the domestic stock market. D) saving and investment are necessarily equal. E)saving and investment are necessarily equal contrary to the case of a closed economy.

b

In the United States over the past fifty years, the fraction of GNP devoted to consumption has fluctuated in a range of about A) 42 to 49 percent. B) 62 to 70 percent. C) 32 to 39 percent. D)22 to 29 percent. E)82 to 89 percent.

e

In the United States, (gross) investment has fluctuated between ________ of GNP in recent years. A) 2 and 12 percent B) 42 and 52 percent C) 32 and 42 percent D) 22 and 32 percent E) 11 and 22 percent

b

Investment is usually A) It is hard to tell from the data whether investment is more or less variable than consumption. B) more variable than consumption. C) a larger component of the GNP than consumption. D) as variable as consumption. E) less variable than consumption.

c

Movements in GDP A) are not allowed to differ at all from movements in GNP by definition. B) differ greatly from movements in GNP. C) do not differ greatly from movements in GNP. D)need to be inflation adjusted in order to match movements in GNP. E) are not relevant to an examination of national income

d

National income equals GNP A) plus depreciation, plus net unilateral transfers, less indirect business taxes. B) less depreciation, plus net unilateral transfers, plus indirect business taxes. C)less depreciation, less net unilateral transfers, plus indirect business taxes. D)less depreciation, plus net unilateral transfers, less indirect business taxes. E) less depreciation, less net unilateral transfers, less indirect business taxes.

e

Net unilateral transfers A) are part of a national income. B) are part of a country's product. C) must be added to NNP in calculations of national income. D) are part of a country's GNP. E) Only A and C.

b

Over the 1980s A) there is no question that rising exports exceeded U.S. foreign debt. B) there is no question that a large decrease in U.S. foreign assets did occur. C) there is no question that a large increase in U.S. foreign assets did occur. D) there is no question that there was almost no change in U.S. foreign assets. E) there is a question whether a large decrease in U.S. foreign assets did occur.

a

Purchases of inventories by A) firms are also counted in investment spending. B) households and Firms are also counted in investment spending. C) firms are not counted in investment spending. D) foreign consumers are counter in investment spending. E) households are also counted in investment spending

e

The German government carries out an official foreign exchange intervention in which it uses dollars held in an American bank to buy French currency from its citizens. How is this accounted for in the balance of payments? A) financial account, German asset import B) financial account, German asset export C) current account, French good export D) current account, German good import E) financial account, French asset export

c

The United States issues a $10,000 debt forgiveness to Argentina. How is this accounted for in the balance of payments? A) financial account, U.S. asset import B) current account, Argentina transfer payment C) financial account, U.S. asset export D) current account, Argentina good import E) current account, U.S. service export

e

The earnings of a Spanish factory with British owners are A) only part of Spain's GNP. B) part of Britain's GNP. C) only counted in Britain's GDP. D) counted in Spain's GDP. E) counted in Britain's GDP and are a part of Spain's GNP

c

The highest component of GNP is A) investment. B) government purchases. C) consumption. D) trade. E) the current account.

c

The official settlements balance or balance of payments is the sum of A) The current account balance and the interest in all investments. B) the current account balance and the non reserve portion of the financial account balance. C)the current account balance, the capital account balance, the non reserve portion of the financial account balance, the statistical discrepancy. D) the current account balance, the capital account balance, the non reserve portion of the financial account balance. E) the current account balance and the capital account balance.

a

The position of the United States current account balance in 2009 was A) borrowed over 9 percent of its GNP, leading to a large current account deficit. B) borrowed over 10 percent of its GNP, leading to a large current account deficit. C) achieved a currant account balance of zero. D)lent over 6 percent of its GNP, resulting in a large current account surplus. E) borrowed less then 5 percent of its GNP, leading to a large current account surplus.

c

The sale of A) the GNP does not include sale of used items priced below $1000. B) a used textbook does enter GNP. C) both a used textbook and a used house do not enter GNP. D) a used house does not enter GNP, but the sale of a used book does. E) a used textbook does not enter GNP, but the sale of a used house does.

c

The services British capital provides in Spain are a service export from Britain A) therefore they are added to Spanish GDP in calculating Spanish GDP. B) therefore they are subtracted from British GDP in calculating British GNP. C) therefore they are added to British GDP in calculating British GNP. D) therefore they are subtracted from Spanish GNP. E) therefore they are added to Spanish GNP in calculating Spanish GDP.

c

Unilateral transfers between countries are A) known for reducing the income of capital owners. B) only international gifts, never payments that do not correspond to the purchase of any good, service, or asset. C) the difference between Y and GNP if the identity Y = C + I + G + CA holds exactly. D) part of the current account but not a part of national income. E)long-term loans.

e

Which of the following is FALSE about private savings and government savings? A) Unlike private saving decisions, government saving decisions are often made with an eye toward their effect on output and employment. B) SP = Y - T - C C) The national income identity can help us to analyze the channels through which government saving decisions influence macroeconomic conditions. D)Total savings (S) = SP + . E) None of the above; all statements are true.

d

Which of the following is TRUE about current cost method and market value method? A) These methods lead to the same valuations. B) Foreign direct investments of the U.S. are valued at their original purchase price. C) The current cost method is preferred by the BEA. D) Based on the current cost method, the BEA's 2009 estimate of U.S. net foreign wealth was $2,737.86 billion. E) They are used by the BEA to place current values on foreign indirect investments.

e

Which of the following is TRUE? A) A country could finance a current account deficit by using previously accumulated foreign wealth to pay for its imports. B) We can describe the current account surplus as the difference between income and absorption. C) A country with a current account deficit must be increasing its net foreign debts by the amount of the deficit. D) A country with a current account surplus is earning more from its exports than it spends on imports. E) All of the above are true of current account balances.

e

Which of the following statements about the central bank is TRUE? A) Only the central bank may hold foreign reserves and intervene officially in exchange markets. B) Today, central banks' reserves consist largely of gold. C) Central banks never inject money into the economy. D) Central banks have little power to alter macroeconomic conditions. E) The Federal Reserve holds only a small level of official reserve assets other than gol

a

Which one of the following expressions is the MOST accurate? A) CA = EX - IM B) CA = EX + IM C) CA = IM - EX D) CA = EX = IM E) CA - IM = EX

e

Which one of the following statements is FALSE? A) The United States had accumulated substantial foreign wealth by the early 1980s. B) In 1987, the country became a net debtor to foreigners for the first time since World War I. C) U.S. foreign debt has continued to grow and now stands at 25 percent of GNP. D) The 1980s witnessed a sustained current account deficit of proportions unprecedented in the twentieth century opened up. E) The U.S. foreign debt was paid off in the 1990s, allowing the U.S. to attain a current account surplus. However, the deficit has returned in recent years.

b

Which one of the following statements is the MOST accurate? A) GNP plus depreciation is called net national product (NNP). B) GNP less depreciation is called net national product (NNP). C) GDP plus depreciation is called net national product (NNP). D) GDP less depreciation is called net national product (NNP). E) GNP less depreciation is called net factor product (NFP).

c

Which one of the following statements is the MOST accurate? A) The sale of a used textbook is a part of the GNP. B) It is hard to tell whether a sale of a used textbook does or does not generate income for factors of production. C) The sale of a used textbook does not generate income for any factor of production. D) The sale of a used textbook sometimes does and sometimes does not generate income for factors of production. E) The sale of a used textbook does generate income for factors of production.