Question 1

When the government runs a budget surplus, it uses the funds to:

Accepted Answer

A) issue bonds. 
B) pay down outstanding debt. 
C) decrease transfer payments. 
D) decrease public saving. 
A) issue bonds. 
B) pay down outstanding debt. 
C) decrease transfer payments. 
D) decrease public saving.

Question 2

Capital losses are:

Accepted Answer

A) decreases in the flow of investment. 
B) decreases in the flow of saving. 
C) the destruction of plant and equipment. 
D) decreases in the value of existing assets. 
A) decreases in the flow of investment. 
B) decreases in the flow of saving. 
C) the destruction of plant and equipment. 
D) decreases in the value of existing assets.

Question 3

Public saving is positive when:

Accepted Answer

A) there is a government budget surplus. 
B) after-tax income of households and businesses is less than consumption expenditures. 
C) the government's budget is balanced. 
D) after-tax income of households and businesses is greater than consumption expenditures. 
A) there is a government budget surplus. 
B) after-tax income of households and businesses is less than consumption expenditures. 
C) the government's budget is balanced. 
D) after-tax income of households and businesses is greater than consumption expenditures.

Question 4

National saving is done by:

Accepted Answer

A) only households. 
B) only businesses. 
C) only governments. 
D) households, businesses, and governments. 
A) only households. 
B) only businesses. 
C) only governments. 
D) households, businesses, and governments.

Question 5

If in the economy, business saving equals $240 billion, household saving equals $15 billion and government saving equals -$150 billion, what is the value of national saving?

Accepted Answer

A) $415 billion 
B) $265 billion 
C) $250 billion 
D) $105 billion 
A) $415 billion 
B) $265 billion 
C) $250 billion 
D) $105 billion

Question 6

Elaine owns a beautiful diamond ring she purchased for $2,500. When she has it appraised she learns that it is now worth $3,000. Based on this information:

Accepted Answer

A) Elaine's saving this year has increased by $500. 
B) Elaine's saving this year has decreased by $500. 
C) Elaine has experienced a $500 capital gain. 
D) Elaine's wealth is unchanged. 
A) Elaine's saving this year has increased by $500. 
B) Elaine's saving this year has decreased by $500. 
C) Elaine has experienced a $500 capital gain. 
D) Elaine's wealth is unchanged.

Question 7

The impact of declining stock prices in the U.S. during 2000-2006 on U.S. household wealth was at least partially offset by:

Accepted Answer

A) an increase in the saving rate. 
B) a decrease in the saving rate. 
C) an increase in public saving. 
D) increasing housing prices. 
A) an increase in the saving rate. 
B) a decrease in the saving rate. 
C) an increase in public saving. 
D) increasing housing prices.

Question 8

Wealth is the same as:

Accepted Answer

A) net worth. 
B) assets. 
C) capital gains. 
D) savings. 
A) net worth. 
B) assets. 
C) capital gains. 
D) savings.

Question 9

Other things equal, the combination of a ________ saving rate and a ________ real interest rate will result in the largest accumulation of wealth over time.

Accepted Answer

A) high; high 
B) high; low 
C) high; zero 
D) low; high 
A) high; high 
B) high; low 
C) high; zero 
D) low; high

Question 10

Which of the following is correct?

Accepted Answer

A) National saving equals private saving plus public saving. 
B) Public saving equals national saving plus private saving. 
C) Private saving equals national saving plus public saving. 
D) National saving equals public saving minus private saving. 
A) National saving equals private saving plus public saving. 
B) Public saving equals national saving plus private saving. 
C) Private saving equals national saving plus public saving. 
D) National saving equals public saving minus private saving.

Question 11

If consumption spending increases by $10 million with no changes in net taxes, then:

Accepted Answer

A) public saving increases. 
B) public saving decreases. 
C) private saving increases. 
D) private saving decreases. 
A) public saving increases. 
B) public saving decreases. 
C) private saving increases. 
D) private saving decreases.

Question 12

Holding other factors constant, an increase in the tax rate on revenue generated by capital will:

Accepted Answer

A) increase national saving. 
B) decrease national saving. 
C) increase investment. 
D) decrease investment. 
A) increase national saving. 
B) decrease national saving. 
C) increase investment. 
D) decrease investment.

Question 13

Higher rates of saving today contribute to ________ in the future.

Accepted Answer

A) higher tax rates 
B) more unemployment 
C) a higher standard of living 
D) more capital gains 
A) higher tax rates 
B) more unemployment 
C) a higher standard of living 
D) more capital gains

Question 14

When government runs a budget deficit, it makes up the difference by:

Accepted Answer

A) issuing government bonds. 
B) paying down outstanding debt. 
C) increasing transfer payments. 
D) increasing public saving. 
A) issuing government bonds. 
B) paying down outstanding debt. 
C) increasing transfer payments. 
D) increasing public saving.

Question 15

If Gerry saves $500 per month, then Gerry's ________ will increase by ________.

Accepted Answer

A) wealth; $500 only if he has no debt 
B) income; $500 only if he buys additional assets 
C) wealth; $500 
D) wealth; $500 only if he buys additional assets 
A) wealth; $500 only if he has no debt 
B) income; $500 only if he buys additional assets 
C) wealth; $500 
D) wealth; $500 only if he buys additional assets

Question 16

The stock of wealth increases more rapidly the faster the flow of ________.

Accepted Answer

A) income 
B) saving 
C) money 
D) assets 
A) income 
B) saving 
C) money 
D) assets

Question 17

In the market for saving, the price is the:

Accepted Answer

A) relative price. 
B) real interest rate. 
C) nominal interest rate. 
D) inflation rate. 
A) relative price. 
B) real interest rate. 
C) nominal interest rate. 
D) inflation rate.

Question 18

The saving of the government sector is called ________ saving.

Accepted Answer

A) private 
B) public 
C) national 
D) aggregate 
A) private 
B) public 
C) national 
D) aggregate

Question 19

The self-control hypothesis suggests that people:

Accepted Answer

A) base their spending decisions (and consequently their saving decisions)on spending decisions of others. 
B) want to save, but lack the discipline to refrain from consuming. 
C) substantially decrease their saving when the real interest rate increases. 
D) control their spending in order to save more when the real interest rate increases. 
A) base their spending decisions (and consequently their saving decisions)on spending decisions of others. 
B) want to save, but lack the discipline to refrain from consuming. 
C) substantially decrease their saving when the real interest rate increases. 
D) control their spending in order to save more when the real interest rate increases.

Question 20

Total taxes minus transfer payments minus government interest payments is called:

Accepted Answer

A) a budget surplus. 
B) net taxes. 
C) a budget deficit. 
D) national saving. 
A) a budget surplus. 
B) net taxes. 
C) a budget deficit. 
D) national saving.

Exam 21: Saving and Capital Formation

When the government runs a budget surplus, it uses the funds to:

Capital losses are:

Public saving is positive when:

National saving is done by:

If in the economy, business saving equals $240 billion, household saving equals $15 billion and government saving equals -$150 billion, what is the value of national saving?

Elaine owns a beautiful diamond ring she purchased for $2,500. When she has it appraised she learns that it is now worth $3,000. Based on this information:

The impact of declining stock prices in the U.S. during 2000-2006 on U.S. household wealth was at least partially offset by:

Wealth is the same as:

Other things equal, the combination of a ________ saving rate and a ________ real interest rate will result in the largest accumulation of wealth over time.

Which of the following is correct?

If consumption spending increases by $10 million with no changes in net taxes, then:

Holding other factors constant, an increase in the tax rate on revenue generated by capital will:

Higher rates of saving today contribute to ________ in the future.

When government runs a budget deficit, it makes up the difference by:

If Gerry saves $500 per month, then Gerry's ________ will increase by ________.

The stock of wealth increases more rapidly the faster the flow of ________.

In the market for saving, the price is the:

The saving of the government sector is called ________ saving.

The self-control hypothesis suggests that people:

Total taxes minus transfer payments minus government interest payments is called:

Thinking Like an Economist

Comparative Advantage

Supply and Demand

Elasticity

Demand

Perfectly Competitive Supply

Efficiency, Exchange, and the Invisible Hand in Action

Monopoly, Oligopoly, and Monopolistic Competition

Games and Strategic Behavior

An Introduction to Behavioral Economics

Externalities, Property Rights, and the Environment

The Economics of Information

Labor Markets, Poverty, and Income Distribution

Public Goods and Tax Policy

International Trade and Trade Policy

Macroeconomics: The Birds Eye View of the Economy

Measuring Economic Activity: GDP and Unemployment

Measuring the Price Level and Inflation

Economic Growth, Productivity, and Living Standards

The Labor Market: Workers, Wages, and Unemployment

Money Prices and the Federal Reserve

Financial Markets and International Capital Flows

Short-Term Economic Fluctuations: An Introduction

Spending and Output in the Short Run

Stabilizing the Economy: The Role of the Fed

Aggregate Demand, Aggregate Supply, and Inflation

Exchange Rates and the Open Economy

Filters

Other things equal, the combination of a saving rate and a real interest rate will result in the largest accumulation of wealth over time.

If Gerry saves $500 per month, then Gerry's will increase by .