ECON 2030: Assignment 4: Savings and Investments

In a closed economy, if Y, C, and T remained the same, a decrease in G would

increase public saving but not private saving.

Figure 26-4 This figure shows the loanable funds market for a closed economy. Refer to Figure 26-4. Starting at point A, the enactment of an investment tax credit would likely cause the quantity of loanable funds traded to

increase to $160 and the interest rate to rise to 7% (point C).

In national income accounting, we use which of the following pairs of terms interchangeably?

"Public saving" and "government tax revenue minus government spending"

For a closed economy, GDP is $11 trillion, consumption is $7 trillion, taxes are $2.5 trillion and the government runs a surplus of $1 trillion. What are private saving and national saving?

$1.5 trillion and $2.5 trillion, respectively

Scenario 26-1. Assume the following information for an imaginary, closed economy. Refer to Scenario 26-1. For this economy, private saving amounts to

$18,000

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?

$2 trillion, $2 trillion

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? Group of answer choices

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

Figure 26-3 The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves. ​ Refer to Figure 26-3. Which of the following movements would be consistent with the government budget going from deficit to surplus and the simultaneous enactment of an investment tax credit?

A movement from Point B to Point F

Figure 26-3 The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves. Refer to Figure 26-3. Which of the following movements shows the effects of households' decision to save more?

A movement from Point C to Point F

Figure 26-2 The figure depicts a supply-of-loanable-funds curve and two demand-for-loanable-funds curves. Refer to Figure 26-2. Which of the following events would shift the demand curve from D1 to D2?

Firms become optimistic about the future and, as a result, they plan to increase their purchases of new equipment and construction of new factories.

Figure 26-1 The figure depicts a demand-for-loanable-funds curve and two supply-of-loanable-funds curves. Refer to Figure 26-1. Which of the following events would shift the supply curve from S1 to S2?

In response to tax reform, households are encouraged to save more than they previously saved

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.

In which of the following cases would it necessarily be true that national saving and private saving are equal for a closed economy?

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

Figure 26-1 The figure depicts a demand-for-loanable-funds curve and two supply-of-loanable-funds curves. Refer to Figure 26-1. What is measured along the vertical axis of the graph?

The interest rate

Figure 26-3 The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves. ​ Refer to Figure 26-3. What, specifically, does the vertical axis represent?

The interest rate

Figure 26-2 The figure depicts a supply-of-loanable-funds curve and two demand-for-loanable-funds curves. Refer to Figure 26-2. What is measured along the horizontal axis of the graph?

The quantity of loanable funds

Figure 26-3 The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves. Refer to Figure 26-3. A shift of the supply curve from S1 to S2 is called

a decrease in the supply of loanable funds.

Scenario 26-1. Assume the following information for an imaginary, closed economy. ​ ​Refer to Scenario 26-1. This economy's government is running a budget

deficit of $3,000.

Suppose the U.S. offered a tax credit for firms that built new factories in the U.S. Then the

demand for loanable funds would shift rightward, initially creating a shortage of loanable funds at the original interest rate.

The slope of the demand for loanable funds curve represents the

negative relation between the real interest rate and investment.

An increase in the government's budget surplus means public saving is

positive and increasing.

The slope of the supply of loanable funds curve represents the

positive relation between the interest rate and saving.

A larger budget deficit

raises the interest rate and reduces investment.