Deck 26: 2: Sec 262 Mc Saving and Investment in the National Income Accounts

Question 1

In a closed economy,what does (Y - T - C)represent?

A)national saving
B)government tax revenue
C)public saving
D)private saving

Answer 1

D

Question 2

You observe a closed economy that has a government deficit and positive investment.Which of the following is correct?

A)Private and public saving are both positive.
B)Private saving is positive;public saving is negative.
C)Private saving is negative;public saving is positive.
D)Both private saving and public saving are negative.

Answer 2

A

Question 3

Which of the following lists correctly identifies the four expenditure categories of GDP?

A)consumption,government purchases,investment,net-exports
B)consumption,investment,depreciation,net-exports
C)consumption,saving,investment,depreciation,
D)consumption,government purchases,investment,savings

Answer 3

B

Question 4

Which of the following statements is correct?

A)The total income in the economy that remains after paying for consumption and government purchases is called private saving.
B)The sum of private saving and national saving is called public saving.
C)For a closed economy,the sum of private saving and public saving must equal investment.
D)For a closed economy,the sum of consumption,national saving,and taxes must equal GDP.

Question 5

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

A)Private saving is equal to government expenditures.
B)Public saving is equal to investment.
C)After paying their taxes and paying for their consumption,households have nothing left.
D)The government's tax revenue is equal to its expenditures.

Question 6

The assumption of a closed economy

A)applies to the world economy.
B)applies to most national economies.
C)requires us to assume that the government's budget is always balanced.
D)All of the above are correct.

Question 7

Which of the following is not correct?

A)Gross domestic product is both total income in an economy and total expenditures on the economy's output of goods and services.
B)In a closed economy net exports are zero.
C)National saving is the sum of private saving and public saving.
D)Purchases of capital goods are excluded from GDP.

Question 8

Which of the following is correct?

A)In the national income accounts,investment and private saving refer to the same thing.
B)In a closed economy if national saving is greater than zero,then everyone must be saving.
C)The financial system channels funds from savers to borrowers.
D)People whose consumption exceeds their income are savers.

Question 9

The identity that shows that total income and total expenditure are equal is

A)GDP = Y.
B)Y = DI + T + NX.
C)GDP = GNP - NX.
D)Y = C + I + G + NX.

Question 10

The purchase of a new house is the one form of

A)investment that is financed by private saving rather than public saving.
B)household spending that is not counted as part of investment in the national income accounts.
C)household spending that is investment rather than consumption.
D)household spending that does not contribute to GDP.

Question 11

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

A)"investment" and "private saving"
B)"investment" and "purchases of stocks and bonds"
C)"saving" and "national saving"
D)"public saving" and "government tax revenue minus government spending"

Question 12

If national saving in a closed economy is greater than zero,which of the following must be true?

A)Either public saving or private saving must be greater than zero.
B)Investment is positive.
C)
D)All of the above are correct.

Question 13

A closed economy

A)does not trade with other economies.
B)is centrally-planned.
C)does not allow financial intermediation.
D)All of the above are correct.

Question 14

A closed economy

A)does not engage in international trade of goods and services.
B)does not engage in international borrowing or lending.
C)both A and B
D)engages in international borrowing and lending.

Question 15

A closed economy does not engage in international trade,therefore

A)national saving is less than investment (S < I).
B)net exports (NX)are zero.
C)Y - C - G > I.
D)national saving is zero.

Question 16

In a closed economy,what remains after paying for consumption and government purchases is

A)national disposable income.
B)national saving.
C)public saving.
D)private saving.

Question 17

In a closed economy,what does (T - G)represent?

A)national saving
B)investment
C)private saving
D)public saving

Question 18

Y = C + I + G + NX is an identity because

A)each symbol identifies a macroeconomic variable.
B)the right-hand and left-hand sides are equal when an equilibrium is reached.
C)the equality holds due to the way the variables are defined.
D)None of the above is correct.

Question 19

Which of the following equations will always represent GDP in an open economy?

A)S = I - G
B)I = Y - C + G
C)Y = C + I + G
D)Y = C + I + G + NX

Question 20

Net exports must equal zero for any economy

A)that is closed.
B)for which Y = C + I + G.
C)for which S = Y - C - G.
D)All of the above are correct.

Question 21

Suppose the economy is closed and consumption is 8 million,taxes are 2 million,and government purchases are 1.75 million.If national saving amounts to 1.25 million,then what is GDP?

A)9 million.
B)9.5 million.
C)13 million.
D)11 million.

Question 22

For a closed economy,GDP is $12 trillion,consumption is $7 trillion,taxes net of transfers are $3 trillion and the government runs a deficit of $1 trillion.What are private saving and national saving?

A)$5 trillion and $3 trillion,respectively
B)$5 trillion and $1 trillion,respectively
C)$2 trillion and $3 trillion,respectively
D)$2 trillion and $1 trillion,respectively

Question 23

In a small closed economy investment is $50 billion and private saving is $45 billion.What are public saving and national saving?

A)$5 billion and $45 billion
B)-$5 billion and $45 billion
C)$5 billion and $50 billion
D)-$5 billion and $50 billion

Question 24

Suppose the economy is closed with national saving of $3 trillion,consumption of $10 trillion,and government purchases of $4 trillion.What is GDP?

A)$3 trillion
B)$9 trillion
C)$11 trillion
D)$17 trillion

Question 25

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?

A)-2,000,1,000,and 2,000,respectively.
B)1,000,2,000,and 3,000,respectively.
C)2,000,-1,000,and 1,000,respectively.
D)2,000,1,000,and 2,000,respectively.

Question 26

According to the definitions of national saving and public saving,if Y,C,and G remained the same,an increase in taxes would

A)raise national saving and public saving.
B)raise national saving and raise public saving.
C)leave national saving and public saving unchanged.
D)leave national saving unchanged and raise public saving.

Question 27

In a closed economy,national saving is

A)usually greater than investment.
B)equal to investment.
C)usually less than investment because of the leakage of taxes.
D)always less than investment.

Question 28

Suppose that in a closed economy GDP is equal to 15,000,government purchases are equal to 3,000,consumption equals 10,500,and taxes equal 3,500.What are private saving and public saving?

A)1,500 and -500,respectively
B)1,500 and 500,respectively
C)1,000 and -500,respectively
D)1,000 and 500,respectively

Question 29

In a closed economy,national saving equals

A)investment.
B)income minus the sum of consumption and government purchases.
C)private saving plus public saving.
D)All of the above are correct.

Question 30

Which of the following expressions must be equal to national saving for a closed economy?

A)Y - I - G - NX
B)Y - C - G
C)Y - I - C
D)G + C - Y

Question 31

Suppose that in a closed economy GDP is 11,000,consumption is 7,500,and taxes are 500.What value of government purchases would make national savings equal to 2,000 and at that value would the government have a deficit or surplus?

A)1,500,deficit
B)1,500,surplus
C)1,000,deficit
D)1,000,surplus

Question 32

According to the definitions of private and public saving,if Y,C,and G remained the same,an increase in taxes would

A)raise both private and public saving.
B)raise private saving and lower public saving.
C)lower private saving and raise public saving.
D)lower private and public saving.

Question 33

Which of the following equations represents GDP for a closed economy?

A)Y = C + I + G + T
B)S = I - G
C)I = Y - C + G
D)Y = C + I + G

Question 34

According to the definitions of national saving and private saving,if Y,C,and G remained the same,an increase in taxes would

A)raise both national saving and private saving.
B)raise national saving and reduce private saving.
C)leave national saving and private saving unchanged.
D)leave national saving unchanged and reduce private saving.

Question 35

Suppose that in a closed economy GDP is equal to 11,000,taxes are equal to 1,000,consumption equals 7,500,and government purchases equal 2,000.What is national saving?

A)-500
B)500
C)2,000
D)None of the above is correct.

Question 36

When public saving falls by $2b and private saving falls by $1b in a closed economy,

A)investment falls by $1b.
B)investment falls by $3b.
C)investment increases by $1b.
D)investment falls by $2b.

Question 37

Suppose private saving in a closed economy is $12b and investment is $10b.

A)National saving must equal $12b.
B)Public saving must equal $2b.
C)The government budget surplus must equal $2b.
D)The government budget deficit must equal $2b.

Question 38

Consider the expressions T - G and Y - T - C.Which of the following statements is correct?

A)Each one of these is equal to national saving.
B)Each one of these is equal to public saving.
C)The first of these is private saving;the second one is public saving.
D)The first of these is public saving;the second one is private saving.

Question 39

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?

A)$2 trillion,$2 trillion
B)$2 trillion,$3 trillion
C)$3 trillion,$3 trillion
D)$4 trillion,$2 trillion

Question 40

Which of the following equations represents GDP for an open economy?

A)Y = C + I + G + NX
B)NX = I - G
C)I = Y - C + G + NX
D)Y = C + I + G

Question 41

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,investment amounts to

A)$38,000.
B)$18,000.
C)$12,000.
D)$15,000.

Question 42

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

A)$22,000.
B)$18,000.
C)$15,000.
D)$37,000.

Question 43

In a closed economy,public saving is the amount of

A)income that households have left after paying for taxes and consumption.
B)income that businesses have left after paying for the factors of production.
C)tax revenue that the government has left after paying for its spending.
D)spending that the government undertakes in excess of the taxes it collects.

Question 44

The country of Bienmundo does not trade with any other country.Its GDP is $30 billion.Its government purchases $5 billion worth of goods and services each year and collects $6 billion in taxes.Private saving in Bienmundo amounts to $5 billion.What are consumption and investment in Bienmundo?

A)$17 billion and $8 billion,respectively.
B)$19 billion and $6 billion,respectively.
C)$19 billion and $8 billion,respectively.
D)$17 billion and $6 billion,respectively.

Question 45

You have some estimates of national accounts numbers for a closed economy for the coming year.Under one set of expectations,government purchases will be $30 billion,transfer payments will be $10 billion,and taxes will be $45 billion.Under another set of expectations,GDP will be $200 billion,taxes will be $50 billion,transfer payments will be $20 billion,consumption will be $120 million,and investment will be $40 billion.Based on these numbers in the first case there should be a

A)$15 billion surplus,and in the second case a $10 billion surplus.
B)$15 billion surplus,and in the second case a $30 billion deficit.
C)$5 billion surplus,and in the second case a $10 billion deficit.
D)$5 billion surplus,and in the second case a $30 billion deficit.

Question 46

For a closed economy,GDP is $18 trillion,consumption is $13 trillion,taxes are $2 trillion and the government runs a deficit of $1 trillion.What are private saving and national saving?

A)$3 trillion and $1 trillion,respectively
B)$3 trillion and $2 trillion,respectively
C)$2 trillion and $3 trillion,respectively
D)$2 trillion and $2 trillion,respectively

Question 47

Which of the following is not always correct for a closed economy?

A)National saving equals private saving plus public saving.
B)Net exports equal zero.
C)Real GDP measures both income and expenditures.
D)Private saving equals investment.

Question 48

If in a closed economy Y = $11 trillion,which of the following combinations would be consistent with national saving of $3 trillion?

A)C = $8 trillion,G = $3 trillion
B)C = $13 trillion,G = -$1 trillion
C)C = $9 trillion,G = $5 trillion
D)C = $7 trillion,G = $1 trillion

Question 49

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

A)budget surplus of $3,000.
B)budget surplus of $12,000.
C)budget deficit of $3,000.
D)budget deficit of $12,000.

Question 50

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?

A)$1.5 trillion and $2.5 trillion,respectively
B)$2.5 trillion and $1.5 trillion,respectively
C)$2.5 trillion and $2.5 trillion,respectively
D)$1.5 trillion and $1.5 trillion,respectively

Question 51

The country of Yokovia does not trade with any other country.Its GDP is $20 billion.Its government collects $2 billion in taxes.Consumption equals $15 billion and investment equals $2 billion.What is public saving in Yokovia,and what is the value of the goods and services purchased by the government of Yokovia?

A)-$2 billion and $1 billion.
B)$1 billion and $1 billion.
C)-$1 billion and $3 billion.
D)-$2 billion and $3 billion.

Question 52

In a closed economy,private saving is

A)the amount of income that households have left after paying for their taxes and consumption.
B)the amount of income that businesses have left after paying for the factors of production.
C)the amount of tax revenue that the government has left after paying for its spending.
D)always equal to investment.

Question 53

For an imaginary closed economy,T = $5,000;S = $11,000;C = $48,000;and the government is running a budget surplus of $1,000.Then

A)private saving = $10,000 and GDP = $55,000.
B)private saving = $10,000 and GDP = $63,000.
C)private saving = $12,000 and GDP = $67,000.
D)private saving = $12,000 and GDP = $69,000.

Question 54

The country of Growpaw does not trade with any other country.Its GDP is $20 billion.Its government purchases $3 billion worth of goods and services each year,collects $4 billion in taxes,and provides $2 billion in transfer payments to households.Private saving in Growpaw is $4 billion.What is investment in Growpaw?

A)$5 billion
B)$4 billion
C)$3 billion
D)$11 billion

Question 55

Consider three different closed economies with the following national income statistics.Country A has taxes of $40 billion,transfers of $20 billion,and government expenditures on goods and services of $30 billion.County B has private savings of $60 billion,and investment expenditures of $40 billion.Country C has GDP of $300 billion,investment of $90,consumption of $180 billion,taxes of $60 billion and transfers of $20 billion.From this information,we know that

A)country A has the largest government budget deficit.
B)country B has the largest government budget deficit.
C)country C has the largest government budget deficit.
D)The government budget deficit is equal in all three countries.

Question 56

In examining the national income accounts of the closed economy of Nepotocracy you see that this year it had taxes of $100 billion,transfers of $20 billion,and government purchases of goods and services of $70 billion.You also notice that last year it had private saving of $70 billion and investment of $50 billion.In which year did Nepotocracy have a budget deficit of $20 billion?

A)this year and last year
B)this year but not last year
C)last year but not this year
D)neither this year nor last year

Question 57

In the small closed economy of San Lorena,the currency is the denar.Statistics for last year show that private saving was 60 billion denars,taxes were 80 billion denars,government purchases of goods and services were 70 billion denars,there were no transfer payments by the government,and GDP was 400 billion denars.What were consumption and investment in San Lorena?

A)270 billion denars,50 billion denars
B)250 billion denars,60 billion denars
C)260 billion denars,70 billion denars
D)None of the above is correct.

Question 58

The country of Cedarland does not trade with any other country.Its GDP is $17 billion.Its government purchases $5 billion worth of goods and services each year and collects $6 billion in taxes.Private saving in Cedarland is $5 billion.For Cedarland,

A)investment is $6 billion and consumption is $7 billion.
B)investment is $6 billion and consumption is $6 billion.
C)investment is $7 billion and consumption is $7 billion.
D)investment is $7 billion and consumption is $6 billion.

Question 59

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,consumption amounts to

A)$68,000.
B)$38,000.
C)$53,000.
D)$60,000.

Question 60

The country of Meditor,a small country with a closed economy,uses the merit as its currency.Recent national income statistics showed that it had GDP of $600 million merits,no government transfer payments,taxes of $150 million merits,a budget surplus of $40 billion merits,and investment of $100 billion merits.What were its consumption and government expenditures on goods and services?

A)$460 million merits and $150 million merits
B)$310 million merits and $190 million merits
C)$350 million merits and $190 million merits
D)$390 million merits and $110 million merits

Question 61

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

A)S = I.
B)S = 0.
C)I = S + NX.
D)S = I + NX.

Question 62

If an economy is closed and if it has no government,then

A)national saving = 0.
B)national saving = private saving.
C)public saving = investment.
D)gross domestic product = consumption.

Question 63

An increase in the government's budget deficit means

A)public saving is greater than $0 and increasing.
B)public saving is greater than $0 and decreasing.
C)public saving is less than $0 and increasing.
D)public saving is less than $0 and decreasing.

Question 64

In the language of macroeconomics,investment refers to

A)saving.
B)the purchase of new capital.
C)the purchase of stocks,bonds,or mutual funds.
D)All of the above are correct.

Question 65

Ethan purchases a new house for $170,000.Ethan's purchase of the house contributes $170,000 to which magnitude in the identity Y = C + I + G?

A)C
B)I
C)G
D)None of the above are correct.

Question 66

Melinda buys new equipment for her dental office with funds she borrowed from a bank that raised funds from depositors.Which of the following is correct?

A)Melinda is an investor.
B)The depositors are investors.
C)Both Melinda and the depositors are investors.
D)Neither Melinda nor the depositors are investors.

Question 67

Scenario 26-2.Assume the following information for an imaginary,closed economy.
GDP = $5 trillion;consumption = $3.1 trillion;
government purchases = $0.7 trillion;and taxes = $0.9 trillion.
Refer to Scenario 26-2.For this economy,public saving is equal to

A)$0.2 trillion and the government is running a budget surplus of $0.2 trillion.
B)$0.2 trillion and the government is running a budget deficit of $0.2 trillion.
C)-$0.2 trillion and the government is running a budget deficit of $0.2 trillion.
D)-$0.2 trillion and the government is running a budget surplus of $0.2 trillion.

Question 68

Fran buys 1,000 shares of stock issued by Miller Brewing.In turn,Miller uses the funds to buy new machinery for one of its breweries.

A)Fran and Miller are both investing.
B)Fran and Miller are both saving.
C)Fran is investing;Miller is saving.
D)Fran is saving;Miller is investing.

Question 69

A budget surplus

A)occurs when the government has debt equal to zero.
B)causes government debt to increase.
C)exists when government spending is greater than tax revenues.
D)reduces the government's debt.

Question 70

Scenario 26-2.Assume the following information for an imaginary,closed economy.
GDP = $5 trillion;consumption = $3.1 trillion;
government purchases = $0.7 trillion;and taxes = $0.9 trillion.
Refer to Scenario 26-2.For this economy,investment amounts to

A)$0.4 trillion.
B)$2.1 trillion.
C)$1.7 trillion.
D)$1.2 trillion.

Question 71

When the government's budget deficit increases

A)the government is borrowing less and public savings falls.
B)the government is borrowing less and public savings increases.
C)the government is borrowing more and public savings falls.
D)the government is borrowing more and public savings increases.

Question 72

When the government has a budget surplus

A)it buys more of its bonds from the public than it sells to the public.
B)it spends more than it receives in tax revenue.
C)private saving is greater than zero.
D)exports are greater than imports.

Question 73

Larry buys stock in A to Z Express Company.Curly Corporation builds a new factory.Whose transaction would be an act of investment in the language of macroeconomics?

A)only Larry's
B)only Curly Corporation's
C)Larry's and Curly Corporation's
D)neither Larry's nor Curly Corporation's

Question 74

Which of the following would a macroeconomist consider as investment?

A)Marisa purchases a bond issued by Proctor and Gamble Corp.
B)Karlee purchases stock issued by Texas Instruments,Inc.
C)Charlie builds a new coffee shop.
D)All of the above are correct.

Question 75

Which of the following would be included as investment in the GDP accounts?

A)the government buys goods from another country
B)someone buys stock in an American company
C)a firm increases its capital stock
D)All of the above are correct.

Question 76

For an economy that engages in international trade,GDP is divided into four components.Which of the following items is not one of those components?

A)consumption.
B)national saving.
C)government purchases.
D)net exports.

Question 77

An increase in the government's budget surplus means

A)public saving is greater than $0 and increasing.
B)public saving is greater than $0 and decreasing.
C)public saving is less than $0 and increasing.
D)public saving is less than $0 and decreasing.

Question 78

Mandy purchases 68.2 shares of a mutual fund for $1,500.Cassie's purchase of these shares contributes $1,500 to which magnitude in the identity Y = C + I + G?

A)C
B)I
C)G
D)None of the above are correct.

Question 79

If the tax revenue of the federal government is less than its spending,then the federal government necessarily

A)runs a budget deficit.
B)runs a budget surplus.
C)runs a national debt.
D)will increase taxes.

Question 80

Jim buys a $1000 bond from ABC Company.ABC Company uses the $1000 to purchase a new piece of machinery.Whose spending would be an act of investment in the language of macroeconomics?

A)only Jim's
B)only ABC Corporation's
C)Jim's and ABC Corporation's
D)neither Jim's nor ABC Corporation's