1. Chris earns $1,500 per week and spends $1,000 per week on living expenses, puts $200 in a savings account, and buys $300 worth of shares in a stock mutual fund. Chris's saving is ____ and Chris's saving rate is _____.
A. $200; 13.3%
B. $200; 20%
C. $300; 20%
D. $500; 33.3%
2. Jordan has the following assets and liabilities:
Jordan's wealth is _____, the value of Jordan's assets is _____ and the value of Jordan's liability is _____.
A. $107,000; $213,000; $100,000
B. $109,000; $213,000; $104,000
C. $111,000; $213,000; $100,000
D. $213,000; $317,000; $104,000
3. Which of the following is a flow?
E. All of the above.
4. If Dylan saves $50 per week, then Dylan's _____ will increase by $50 per week.
5. Crowding out is the tendency for increased government deficits to:
A. reduce investment spending.
B. increase investment spending.
C. reduce consumption spending.
D. increase consumption spending.
6. If total government tax collections equal $200 billion, transfer payments equal $75 billion, and government interest payments equal $10 billion, then net taxes equal:
A. $115 billion.
B. $125 billion.
C. $190 billion.
D. $275 billion.
7. You are given the following information about the economy:
Private saving is _____; public saving is ________; and national saving is ______.
A. 800; 200; 600
B. 800; 200; 1,000
C. 1,000; 800; 1,000
D. 1,500; 700; 2,700
8. Fred and Wilma just had a baby girl and want to make sure they save enough in the future to send her to college. This is an example of the ____ motive for saving.
9. To the extent that households are target savers, who save to reach a specific goal, an increase in the interest rate _____ household saving and a decrease in the interest rate _____ household saving.
A. increases; decreases
B. decreases; increases
C. does not affect; increases
D. increases; does not affect
10. The value of the marginal product of new capital increases when the:
A. price of new capital goods increases.
B. real interest rate increases.
C. the price of the good the firm produces decreases.
D. productivity of new capital increases.
11. Holding other factors constant, a decrease in the tax rate on the revenue generated by capital will:
A. shift the savings graph to the right; reduce the equilibrium real rate of interest and increase national saving in equilibrium.
B. shift the savings graph to the left; raise the equilibrium real rate of interest and decrease national saving in equilibrium.
C. shift the investment graph to the right; raise the equilibrium real rate of interest and increase investment in equilibrium.
D. shift the investment graph to the left; reduce the equilibrium real rate of interest and decrease investment in equilibrium.
12. The supply of saving equals desired (or, ex-ante) _____ and the demand for saving equals desired (or, ex ante) _____.
A. investment; national saving
B. investment; public saving
C. national saving; investment
D. national saving; capital
13. Holding other factors constant, if a reduction in government expenditures moves the government budget from deficit to surplus, then the real interest rate will ___ and the equilibrium quantity of national saving and investment will ____.
A. increase; increase
B. decrease; decrease
C. increase; not change
D. decrease; increase
14. Ex-post (in an accounting sense), Savings _____ equals Investment. However, ex-ante, ______ savings may very well be different from _______ investment. It is the ______ which adjusts to make desired savings equal to desired investment.
A. sometimes; public; private; inflation rate
B. always; desired; desired; real interest rate
C. always; actual; actual; nominal interest rate
D. never; actual; actual; real interest rate
15. Joe's Taco Hut can purchase a delivery truck for $20,000 and he estimates it will generate a net income (i.e., after-taxes and maintenance and operating costs) of $2,000 per year. He should:
A. purchase the truck only if the real interest rate is less than 12%.
B. not purchase the truck if the real interest rate is greater than 2%.
C. purchase the truck if the real interest rate is greater than 10%.
D. purchase the truck if the real interest rate is less than 10%.