Question 1

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.

Accepted Answer

An increase in taxes would reduce disposable income, leading to a reduction in private saving. However, since the government is collecting more revenue, national saving would be unchanged. Therefore, the correct answer is D, which states that national saving would remain unchanged and private saving would decrease.

Question 2

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

Accepted Answer

Private saving = Y - T - C = $11 trillion - $2.5 trillion - $7 trillion = $1.5 trillion

National saving = Y - C - G = $11 trillion - $7 trillion - ($1 trillion) = $3 trillion

Since national saving consists of both private saving and public saving (or the government surplus), we can also calculate it as:

National saving = Sprivate + Spublic = $1.5 trillion + $1 trillion = $2.5 trillion

Question 3

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

Accepted Answer

The answer of Suppose a closed economy had public saving...

Question 4

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

Accepted Answer

The answer of In a small closed economy investment is...

Question 5

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.

Accepted Answer

In the national income accounting identity, Y = C + I + G + NX, where Y stands for national income, C for consumption, I for investment, G for government spending and NX for net exports. 
- Private saving is the part of national income that is not consumed or spent by households, so it is given by S = Y - T - C, where T stands for taxes. This is equivalent to T - G because national saving is equal to private saving plus public saving. Therefore, the first expression, T - G, represents public saving. 
- Public saving is the difference between government revenue (T) and spending (G), so the second expression, Y - T - C, can be rewritten as Y - (T + C) = (Y - T) - C, which is equal to private saving minus consumption. Therefore, the second expression, Y - T - C, represents private saving.

Question 6

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

Accepted Answer

The answer of Suppose the economy is closed with national...

Question 7

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.

Accepted Answer

The answer of Suppose that in a closed economy GDP...

Question 8

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

Accepted Answer

The answer of If in a closed economy Y =...

Question 9

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

Accepted Answer

The answer of Suppose that in a closed economy GDP...

Question 10

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.

Accepted Answer

In a closed economy, national saving is equal to investment because any saving that is not invested domestically will be used to purchase foreign assets, which would not contribute to the investment in the domestic economy. Therefore, in a closed economy, savings and investment are equal.

Question 11

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

Accepted Answer

The answer of Suppose that in a closed economy GDP...

Question 12

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.

Accepted Answer

An increase in taxes would decrease disposable income, leading to a decrease in consumption. However, government spending (G) remains the same. As a result, public saving (T-G) would increase, but since national saving is the sum of private saving and public saving, national saving would remain unchanged. Therefore, the correct option is D, as it implies that public saving would increase due to a higher tax rate, while national saving stays the same.

Question 13

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.

Accepted Answer

The answer of Suppose that in a closed economy GDP...

Question 14

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

Accepted Answer

The answer of For a closed economy, GDP is $18...

Question 15

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.

Accepted Answer

An increase in taxes would lower disposable income and thus reduce consumption. This would lead to a decrease in private saving. However, the increase in taxes would also lead to an increase in public saving since the government would be collecting more revenue. Therefore, private saving would decrease and public saving would increase, resulting in a lower private saving and higher public saving situation, as described in choice C.

Question 16

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.

Accepted Answer

The answer of When public saving falls by $2b and...

Question 17

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.

Accepted Answer

The answer of For an imaginary closed economy, T =...

Question 18

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.

Accepted Answer

The answer of Suppose private saving in a closed economy...

Question 19

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

Accepted Answer

The answer of For a closed economy, GDP is $12...

Question 20

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.

Accepted Answer

The answer of Suppose the economy is closed and consumption...

Quiz 26: Saving, Investment, and the Financial System

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

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?

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?

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

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

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

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?

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

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?

In a closed economy, national saving is

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?

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

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?

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?

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

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

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

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

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?

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?