Exam 8: Saving, Investment, and the Financial System

In a closed economy, if Y remained the same, but G rose, T rose by the same amount as G, and C fell but by less than the increase in T, what would happen to private and national saving?

A policy that induces people to save more shifts

What would happen in the market for loanable funds if the government were to increase the tax on interest income?

A higher interest rate makes more attractive. Therefore the quantity of loanable funds supplied increases.

Table 26-3. The following table presents information about a closed economy whose market for loanable funds is in equilibrium. -Refer to Table 26-3. Determine the quantity of private saving.

Other things the same, an increase in the interest rate

A government budget deficit affects the supply of loanable funds, rather than the demand for loanable funds, because

Figure 26-3. The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves. -Refer to Figure 26-3. Which of the following movements shows the effects of households' decision to save more?

In a closed economy, if Y, C, and T remained the same, a decrease in G would

If the nominal interest rate is 3 percent and the inflation rate is 4 percent, then the real interest rate is

Other things the same, corporate bonds generally feature higher interest rates than U.S. government bonds.

If a reform of the tax laws encourages greater saving, the result would be

An increase in the demand for loanable funds increases the equilibrium interest rate and decreases the equilibrium level of saving.

If Congress instituted an investment tax credit, the interest rate would

Figure 26-2. The figure depicts a supply-of-loanable-funds curve and two demand-for-loanable-funds curves. -Refer to Figure 26-2. Which of the following events would shift the demand curve from D1 to D2?

Congress and the President allow people to make greater contributions to tax-deferred savings accounts. Which curve in the market for loanable funds would shift, which direction would it shift, what would happen to the interest rate, and what would happen to investment spending?

When the government runs a budget deficit,

In a closed economy, if taxes fall and consumption rises, then private saving must fall.

Joan uses some of her income to buy mutual fund shares. A macroeconomist refers to Joan's purchase as investment.

Public saving is equal to national saving minus private saving.