1. 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.
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.
3. 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.
4. 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.
5. 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.
6. 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.
7. 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.
8. In a closed economy, what does (T – G) represent?
a.
national saving
b.
investment
c.
private saving
d.
public saving
9. 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.
10. In a closed economy, what does (Y – T – C) represent?
a.
national saving
b.
government tax revenue
c.
public saving
d.
private saving
11. 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.
12. 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.
13. 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.
14. 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.
15. 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”
16. 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.
17. 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.
18. 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
19. 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.
20. 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
21. 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
22. 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
23. 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
24. 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.
25. 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.
26. 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
27. 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.
28. 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.
29. 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
30. 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.
31. 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.
32. 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.
33. 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.
34. 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.
35. 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
36. 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
37. 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.
38. 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
39. 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
40. 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.
41. 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
42. 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
43. 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
44. 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.
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.
45. Refer to Scenario 26–1. For this economy, investment amounts to
a.
$38,000.
b.
$18,000.
c.
$12,000.
d.
$15,000.
46. 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.
47. Refer to Scenario 26–1. For this economy, private saving amounts to
a.
$22,000.
b.
$18,000.
c.
$15,000.
d.
$37,000.
48. Refer to Scenario 26–1. For this economy, consumption amounts to
a.
$68,000.
b.
$38,000.
c.
$53,000.
d.
$60,000.
49. 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.
50. 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
51. 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.
52. 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