Econ Chapter 10

In an open economy the GDP is $12 trillion this year. Consumption is $8 trillion, and government spending is $2 trillion. Taxes are $0.5 trillion. Exports are $1 trillion, and imports are $3 trillion. (Scenario: Open Economy S = I) How much is investment spending?

CorrectA. $4 trillion (I = Snational + (IM-EX))

In an open economy the GDP is $12 trillion this year. Consumption is $8 trillion, and government spending is $2 trillion. Taxes are $0.5 trillion. Exports are $1 trillion, and imports are $3 trillion. How much is the net capital inflow?

CorrectD. $2 trillion (NCI = IM - EX)

The aggregate production function exhibits:

diminishing returns to physical capital.

The government saves when it:

has a budget surplus.

In an open economy, total investment is equal to:

national savings plus capital inflow.

In a simple closed economy, all investment spending must come from:

savings

The Fisher effect states that:

the expected real rate of interest is unaffected by the change in expected inflation.

In an open economy the GDP is $12 trillion this year. Consumption is $8 trillion, and government spending is $2 trillion. Taxes are $0.5 trillion. Exports are $1 trillion, and imports are $3 trillion. (Scenario: Open Economy S = I) How much is private saving?

$3.5 trillion (GDP=C+S+T)

Which of the following is an example of investment spending?

A local Domino's Pizza store has purchased a new pizza oven.

Suppose there is no trade and no government in a small economy. The GDP is equal to $25 trillion, and consumption spending is equal to $18 trillion this year. (Scenario: A Small Economy) What is the level of private saving?

CorrectA. $7 trillion (GDP = C + S + T)

Economists use _____ as a model to explain how savers and borrowers come together to determine the equilibrium rate of interest.

CorrectA. the market for loanable funds

Suppose there is no trade and no government in a small economy. The GDP is equal to $25 trillion, and consumption spending is equal to $18 trillion this year. (Scenario: A Small Economy) What is the level of investment spending?

CorrectC. $7 trillion (GDP = C + I + G)

In an open economy the GDP is $12 trillion this year. Consumption is $8 trillion, and government spending is $2 trillion. Taxes are $0.5 trillion. Exports are $1 trillion, and imports are $3 trillion. (Scenario: Open Economy S = I) What is the government budget balance?

CorrectC. a deficit of $1.5 trillion (Taxes - Government Spending)

All other things unchanged, a general decrease in the amount of government borrowing will typically:

CorrectC. shift the loanable funds demand curve to the left. (Quantity of funds demanded by borrowers rises interest rate rises) and vice versa

In an open economy the GDP is $12 trillion this year. Consumption is $8 trillion, and government spending is $2 trillion. Taxes are $0.5 trillion. Exports are $1 trillion, and imports are $3 trillion. (Scenario: Open Economy S = I) How much is national saving?

CorrectD. $2 trillion (Snational = GDP - C - G)

In the long run, an increase in saving will generally:

increase the rate of economic growth.