1) In a closed economy, investment cannot be equal to private savings. A) True B) False 2) A rise in risk premium will cause bond market prices to rise. A) True B) False 3) If the government is running a budget deficit and private saving is less than investment, the country must be running a trade deficit at equilibrium. A) True B) False

1) In a closed economy, investment cannot be equal to private savings. A) True B) False 2) A rise in risk premium will cause bond market prices to rise. A) True B) False 3) If the government is running a budget deficit and private saving is less than investment, the country must be running a trade deficit at equilibrium. A) True B) False

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter31: The Impacts Of Government Borrowing

Section: Chapter Questions

Problem 4SCQ: Imagine an economy in which Ricardian equivalence holds. This economy has a budget deficit of 50, a...

See similar textbooks

Similar questions

3. Effects of a government budget deficit Suppose a hypothetical open economy uses the U.S. dollar as currency. The table below presents data describing the relationship between different real interest rates and this economy’s levels of national saving, domestic investment, and net capital outflow. Assume that the economy is currently operating under a balanced government
You observe a closed economy that has a government deficit and positive investment. Which of the following is correct? Select one: a. Both private saving and public saving are negative. b. Private and public saving are both positive. c. Private saving is negative; public saving is positive. d. Private saving is positive; public saving is negative.
Which of the following must be true of an economy in equilibrium with no foreign sector (check all that apply)? Question options: There are no savings (S = 0) The sum of all injections equals the sum of all leakages Any private surplus will be equal to a public (government) deficit of the same size (dollar value) Actual investment (including inventories) is equal to intended investment G – T = S – II S + II = T + G
Suppose the GDP of a country with a closed economy is $22 trillion, (net) taxes are $4.2 trillion, public saving is $0.8 trillion, and private saving is $1.3 trillion. What are the values of consumption, investment, national saving, and government spending? 1b Is the government of this country running a budget surplus or a deficit?
3. Effects of a government budget deficit Suppose a hypothetical open economy uses the U.S. dollar as currency. The table below presents data describing the relationship between different real interest rates and this economy’s levels of national saving, domestic investment, and net capital outflow. Assume that the economy is currently operating under a balanced government budget.
Assume the U.S. government was to decide to increase the budget deficit. This action will most likely cause __________ to increase. A. interest rates B. education level C. unemployment D. tax
Private domestic saving provides the pool of funds available for Private domestic saving provides the pool of funds available for ... only financing government budget deficits putting under one's mattress Domestic investment and financing government budget deficits Consuming goods and services
An increase in the budget deficit is the result of: A) Expansionary monetary policy; B) Contractionary monetary policy; C) Expansionary fiscal policy; D) Contractionary fiscal policy. Company tax is a: (a) Progressive, direct tax; (b) Progressive, indirect tax; (c) Proportional direct tax; (d) Regressive indirect tax. In the base year, a country produced 50 units of output at a price of R6,00 each for a nominal GDP of R300. This year it produces 60 units of output at a price of R8,00 each. What is the percentage change in real GDP since the base year? (a) 5%; (b) 10%; (c) 20%; (d) 15%.
1a)If national income Y = 10,400, disposable income is Yd = 8,800 (assuming transfer payments are zero), consumption is C = 7,700, net exports is NX = 220, and the budget deficit is BD = 150, what is the level of private domestic investment, I ? 1,170 9,230 1,750 1,600 730 1b) The government's structural budget deficit is also called the cyclically-adjusted budget deficit general government budget deficit estimated budget deficit actual budget deficit cyclical budget deficit
The two ways in which deficit spending can impose a burden on future generations are: a)by requiring future generations to face lower government spending and to utilize a smaller stock of human capital. b)by substituting private goods for public goods and thereby benefiting only large businesses. c)by substituting private goods for public goods and thereby shifting resources to foreign residents. d)by requiring future generations to face higher taxes and to work with a lower accumulated stock of capital goods.
Which of the following statements about government deficits is correct?a. Deficits should occur during recessionary gaps and surpluses during inflationary gapsb. Governments usually have deficits and rarely have surplusesc. Deficits are politically more popular than surplusesd. All of these statements are correcte. Options a and b are both correct but c is not
3. Effects of a government budget deficit Consider a hypothetical open economy. The following table presents data on the relationship between various real interest rates and national saving, domestic investment, and net capital outflow in this economy, where the currency is the U.S. dollar. Assume that the economy is currently experiencing a balanced government budget. Real Interest Rate National Saving Domestic Investment Net Capital Outflow (Percent) (Billions of dollars) (Billions of dollars) (Billions of dollars) 7 60 30 -10 6 55 40 -5 5 50 50 0 4 45 60 5 3 40 70 10 2 35 80 15