Econ Homework Assignment 3
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
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
If the nominal interest rate is 4 percent and the inflation rate is 3 percent, then the real interest rate is
1 percent
Scenario 26-1. Assume the following information for an imaginary, closed economy. GDP $100,000 Taxes $22,000 Government Purchases $25,000 National Saving $15,000 Refer to Scenario 26-1. For this economy, private saving amounts to
18,000
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?
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 26-1 The figure depicts a demand-for-loanable-funds curve and two supply-of-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
If the government instituted an investment tax credit, then which of the following would be higher in equilibrium?
Saving and the interest rate
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 26-3 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 26-1 The figure depicts a demand-for-loanable-funds curve and two supply-of-loanable-funds curves. Refer to Figure 26-2. What is measured along the horizontal axis of the graph?
The quantity of loanable funds
What would happen, all else equal, in the market for loanable funds if the government were to decrease the tax rate on interest income?
There would be an increase in the equilibrium 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. GDP $100,000 Taxes $22,000 Government Purchases $25,000 National Saving $15,000 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
Suppose the government changed the tax laws, with the result that people were encouraged to consume more and save less. Using the loanable funds model, a consequence would be
higher interest rates and lower investment
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 Group of answer choices
increase to $160 and the interest rate to rise to 7% (point C)
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 Group of answer choices
positive relation between the interest rate and saving
a larger budget deficit
raises the interest rate and reduces investment
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
