Exam 8: Saving, Investment, and the Financial System

The country of Hykania does not trade with any other country. Its GDP is $20 billion. Its government purchases $3 billion worth of goods and services each year, collects $3 billion in taxes, and provides $2 billion in transfer payments to households. Private saving in Hyrkania is $4 billion. What is investment in Hyrkania?

Which of the following best explains why the debt-to-GDP ratio important?

Public saving is equal to national saving minus private saving.

Draw and label a graph showing equilibrium in the market for loanable funds.

Jerry has the choice of two bonds, one that pays 3 percent interest and one that pays 6 percent interest. Which of the following situations is most likely?

In a closed economy, the fact that total income equals total expenditure is reflected by the GDP identity Y = C + I + G. a.Starting from the GDP identity, show that national saving (S) must be equal to investment. Show that an increase in government spending reduces national saving. b.Rewrite the GDP identity by introducing taxes (T). In this new form of the GDP relationship, identify private saving and public saving. Show that an increase in taxes has no effect on national saving. c.Is the equation S = I true for an open economy? Could you explain why or why not?

In a closed economy, what is private saving?

Which of the following terms refers to the situation when the tax revenue of the federal government exceeds government spending?

World Wide Delivery Service Corporation develops a way to speed up its deliveries and reduce its costs. Which of the following would we expect?

Which of the following best defines a corporation's earnings?

If the current market interest rate for loanable funds is below the equilibrium level, which of the following would we expect to happen?

What is the source of the supply of and demand for loanable funds, respectively?

In a closed economy, investment must be equal to private saving.

If other things are the same, will countries that tax saving less have lower or higher interest rates and investment than other countries?

If the nominal interest rate is 8 percent and the real interest rate is 2 percent, what is the inflation rate?

Table 8-1 -Refer to Table 8-1. What were Hershey's earnings per share?

Suppose that in a closed economy GDP is equal to 15,000, taxes are equal to 2500, consumption equals 7500, and government expenditures equal 3000. What is public saving?

Assume that the bonds below have the same term and principal and that the province or local government that issues the municipal bond has a good credit rating. Which listing of bonds is ordered from the one that pays the most interest to the one that pays the least interest?

How is a perpetuity distinguished from other bonds?

Which of the following best characterizes the lending strategy of banks?