Chapter 8 Missed Test bank question
Which of the following policies would be expected to increase private saving?
Reducing the tax rate on capital gains and dividends
Which of the following policies would be expected to increase private saving?
Replacing the income tax with a consumption tax
Which of the following is a flow?
Saving
Which of the following is a stock?
Wealth
Holding other factors constant, a decline in the price of new capital goods will
increase investment
The introduction of a new technology that raises the marginal product of new capital will
increase real interest rates and the equilibrium quantity of saving supplied and demanded
The investment demand curve indicates that there is an
inverse relationship between the real interest rates and the level of investment spending
When the government runs a budget deficit, it makes up the difference by
issuing bonds
From a macroeconomic perspective, the problem of low household saving probably been overstated because:
it is national saving, not house, not household saving, that allows an economy to accumulate new capital
The large increase in household wealth in the United States in the 1990s was the result of
large capital gains
Emprical evidence indicates that higher real interest rates lead to _______ in savings
modest increases
In an economy without international trade, investment must equal _______ saving
national
The excess of government spending over tax collections is
the government budget deficit
Net taxes equal the amount that
the private sector pays the government minus the amount the private sector receives from the government
The expected benefit of investment equals
the value of the marginal product of capital
Public saving is positive when
there is a government budget surplus
As the real interest rate decreases, the quantity of saving supplied _______ and the quantity of saving demanded _________
decreases, increases
An increase in the interest rate ________ household saving and a decrease in the interest rate ______ household saving
decreases; increases
By international standards, the household saving rate of the United States
has not ever really been high
Public saving is
identical to the governmental budget surplus
Government budget deficit equals
G - T
Which of the following hypotheses is a plausible explanation for why US households save so little?
Government assistance to the elderly has reduced the need for life-cycle saving
Private saving is positive when
after-tax income of households and businesses is greater than consumption expenditures
The greater the flow of investment spending, the greater the increase in the stock of
capital
The real rate of interest measures the _______ of capital investment
opportunity cost
When the government runs a budget surplus, it uses the funds to
pay down outstanding debt
The costs of investment depend on the ______ and the ______
price of new capital goods; real interest rate
The value of the marginal product of new capital increases when the
productivity of new capital increases
In the market for saving, the price is the
real interest rate
The supply and demand for saving are brought into equilibrium by adjustments of the
real interest rate
The stock of wealth increases more rapidly the faster the flow of
saving