Saving and Invesments

In a small closed economy investment is $50 billion and private saving is $45 billion. What are public saving and national saving?

• $5 billion and $45 billion                     

• -$5 billion and $45 billion                    

• A.   $5 billion and $50 billion

• -$5 billion and $50 billion

The slope of the demand for loanable funds curve represents the

• positive relation between the real interest rate and investment

• negative relation between the real interest rate and investment

• positive relation between the real interest rate and saving

• negative relation between the real interest rate and saving

Other things the same, a higher interest rate induces people to

• save more, so the supply of loanable funds slopes upward

• save less, so the supply of loanable funds slopes downward

• invest more, so the supply of loanable funds slopes upward

• invest less, so the supply of loanable funds slopes downward

If the quantity of loanable funds demanded exceeds the quantity of loanable funds supplied

• there is a surplus and the interest rate is above the equilibrium level

• there is a surplus and the interest rate is below the equilibrium level

• there is a shortage and the interest rate is above the equilibrium level

• there is a shortage and the interest rate is below the equilibrium level

The real interest rate is the

• interest rate corrected for inflation

• interest rate as usually reported by banks

• difference between the interest rate charged by banks on the loans they make and the interest rate paid by banks to their depositors

• difference between the average dividend yield on stocks and the average interest rate on bonds

If the government institutes policies that diminish incentives to save, then in the loanable funds market

• the demand for loanable funds shifts rightward

• the demand for loanable funds shifts leftward

• the supply of loanable funds shifts rightward

• the supply of loanable funds shifts leftward

Other things the same, a government budget deficit

• reduces public saving, but not national saving

• reduces national saving, but not public saving

• reduces both public and national saving

• reduces neither public saving nor national saving

An increase in the budget deficit would cause a

• shortage of loanable funds at the original interest rate, which would lead to falling interest rates

• surplus of loanable funds at the original interest rate, which would lead to rising interest rates

• shortage of loanable funds at the original interest rate, which would lead to rising interest rates

• surplus of loanable funds at the original interest rate, which would lead to falling interest rates

Crowding out occurs when investment declines because

• a budget deficit makes interest rates rise

• a budget deficit makes interest rates fall

• a budget surplus makes interest rates rise

• a budget surplus makes interest rates fall

Which of the following expressions must be equal to national saving for a closed economy?

• Y - I - G -NX                     

• Y - C – G                           

• Y - I - C

• G + C – Y