Chapter 25.2 Flashcards
Consider the long-run theory of investment, saving and growth. In the long-run version of our macro model (with real GDP equal to Y*), the equilibrium interest rate is determined where
A) aggregate demand equals aggregate expenditure.
B) desired national saving equals desired investment.
C) the nominal price level equals the real price level.
D) desired consumption equals desired investment.
E) desired saving equals desired consumption.
B
If government policies are to be successful in enhancing a country’s long-run growth rate, they likely work through generating
A) higher levels of current consumption.
B) greater private investment in physical and human capital.
C) an increase in current consumption and a reduction in saving.
D) a leftward shift in the AS curve.
E) fiscal policies that shift the AD curve to the right.
B
Consider a closed economy with real GDP in the long run of $400, consumption expenditures of $250, government purchases of $75, and net tax revenue of $20. What is the level of national saving? A) $55 B) $75 C) $95 D) $225 E) $230
B
Which of the following equations is a correct expression for national saving in the long run when real GDP equals potential output? A) NS = Y* - C - G B) NS = Y* - C + T - G C) NS = Y* - T - C D) NS = T - G E) NS = T - G - C
A
Refer to Table 25-2. What is the level of private saving for this economy? A) $50 B) $100 C) $150 D) $400 E) $450
D
Refer to Table 25-2. What is the level of public saving for this economy? A) -$200 B) -$150 C) -$50 D) $150 E) $200
B
Refer to Table 25-2. What is the level of national saving for this economy? A) -$200 B) -$150 C) -$50 D) $150 E) $250
E
Refer to Table 25-3. What is the level of private saving for this economy? A) $50 B) $100 C) $500 D) $2000 E) $3000
C
Refer to Table 25-3. What is the level of public saving for this economy? A) -$200 B) -$100 C) $200 D) $300 E) $500
A
Refer to Table 25-3. What is the level of national saving for this economy? A) $50 B) $100 C) $200 D) $250 E) $300
E
Refer to Table 25-3. What is the level of combined budget surpluses of all levels of government in this economy? A) $50 B) $100 C) $500 D) -$200 E) -$500
D
Suppose the government has a budget deficit of $400. If the country's level of national saving is $200, then private saving must be A) -$400. B) $200. C) $400. D) $600. E) $800.
D
Suppose the government has a budget surplus of $2 billion. If the country's level of private saving is $1.2 billion, then national saving must be A) -$1.2 billion. B) -$800 million. C) $0. D) $800 million E) $3.2 billion
E
Consider the long-run theory of investment, saving, and growth. For a given level of private saving, an increase in government purchases will likely \_\_\_\_\_\_\_\_ the economy's long-run growth rate. A) slow down B) accelerate C) not affect D) increase E) Not enough information to know
A
For a given level of national income, an increase in private consumption or government purchases will cause national saving to
A) increase.
B) grow at a constant rate.
C) remain unchanged from its initial level.
D) exceed investment.
E) decrease.
E
An increase in the government budget surplus, everything else constant, will cause a(n)
A) decrease in national saving.
B) increase in national saving.
C) decrease in the growth rate.
D) equal increase in private consumption.
E) equal decrease in private investment.
B
Consider a closed economy in the long run. A country with a low national saving rate (as a fraction of real GDP) is likely to have
A) a high growth rate because aggregate expenditure will be high out of any given income.
B) either a high or low growth rate depending on the investment schedule.
C) an AS curve moving continually to the right.
D) trouble achieving potential real national income in the short run.
E) a low growth rate because sustained high investment is not possible with low saving.
E
Consider the market for financial capital for a closed economy in the long run. Other things being equal, a country with a high national saving rate will tend to have
A) a high growth rate because aggregate expenditure will be high out of any given income.
B) a high growth rate because sustained high investment is possible with high saving.
C) an AS curve moving continually to the left.
D) trouble achieving potential real national income in the short run.
E) either a high or low growth rate depending on the investment demand schedule.
B
Which of the following statements concerning national saving is true?
A) A country’s saving rate is unrelated to its growth rate.
B) An increase in the rate of saving will lead to a reduction in consumption and therefore to both a short-run and a long-run decrease in national income.
C) An increase in the rate of saving will cause an immediate increase in national income, but may cause a drop in national income in the long-run.
D) An increase in the rate of saving will always be offset by a reduction in private investment.
E) An increase in the rate of saving will lead to a short-run reduction in national income, but to higher economic growth in the long run.
E
For a given level of national income, a decrease in government tax revenues will cause A) a decrease in national saving. B) an increase in national saving. C) an increase in the growth rate. D) no effect on national saving. E) a decrease in consumption.
A
Consider the long-run theory of investment, saving, and growth. For a given level of national income, a decrease in private consumption or government purchases will cause the equilibrium interest rate to
A) increase and the flow of national saving to decrease.
B) increase and the flow of investment to increase.
C) increase and the flow of investment to decrease.
D) decrease and the flow of national saving to increase.
E) decrease and the flow of national saving to decrease.
D
Consider the long-run theory of investment, saving and growth. For a given level of national income, a decrease in private consumption or government purchases will cause the equilibrium interest rate to
A) increase and the flow of national saving to fall.
B) increase and the flow of investment to increase.
C) increase and the flow of investment to decrease.
D) decrease and the flow of investment to decrease.
E) decrease and the flow of investment to increase.
E
Consider the market for financial capital in the long run. The national saving curve is upward sloping because an increase in the real interest rate
A) leads households to increase their current consumption.
B) leads to an increase in investment demand.
C) decreases the supply of public saving.
D) leads households to reduce their current consumption.
E) decreases the supply of private saving.
D
Consider the market for financial capital in the long run. The investment demand curve is downward sloping because
A) an increase in the real interest rate leads to an increase in investment demand.
B) all components of desired investment are negatively related to the real interest rate.
C) all components of desired investment are positively related to the real interest rate.
D) a decrease in the real interest rate reflects a higher opportunity cost to firms of using financial capital.
E) an increase in the real interest rate reflects a lower opportunity cost to firms of using financial capital.
B