Ch 8 Saving, Capital Formation, and Financial Markets

Question 1

Flow

Answer 1

a measure that is defined per UNIT OF TIME

Question 2

Stock

Answer 2

a measure that is defined at a POINT IN TIME

Question 3

Capital gains

Answer 3

increases in the value of existing assets

Question 4

Capital losses

Answer 4

decreases in the value of existing assets

Question 5

National saving

Answer 5

the saving of the entire economy, equal to GDP less consumption expenditures and government purchases of goods and services or Y-C-G

Question 6

Transfer payments

Answer 6

payments the government makes to the public for which it receives no current goods or services in return

Question 7

Private saving

Answer 7

the saving of the private sector of the economy is equal to the after-tax income of the private sector minus consumption expenditures (Y-T-C); private saving can be further broken down into household saving and business saving

Question 8

Public saving

Answer 8

the saving of the government sector is equal to net tax payments minus government purchases (T-G)

Question 9

Government budget surplus

Answer 9

the excess of government tax collections over government spending (T-G); the government budget surplus equals public saving

Question 10

Government budget deficit

Answer 10

the excess of government spending over tax collections (G-T)

Question 11

Life-cycle saving

Answer 11

saving to meet long-term objectives such as retirement, college attendance, or the purchase of a home

Question 12

Precautionary saving

Answer 12

saving for protection against unexpected setbacks such as the loss of a job or a medical emergency

Question 13

Bequest saving

Answer 13

saving done for the purpose of leaving an inheritance

Question 14

Crowding out

Answer 14

the tendency of increased government deficits to reduce investment spending