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