1) A person responds to an increase in income by consuming $x more. Most likely, the person's income has increased by than $x, and their savings have A) more, increased. B) more, decreased. C) less, increased. D) less, decreased. Answer: A 2) In 2021 US Federal government receipts equaled $4,237.6 billion and expenditures $7,02 l .4 billion. This means that the US Federal govemment's saving in billions of dollars was A) 2,783.8 B) 4,783.8 C) 11,259 D) -1 1,259 Answer: B 3) Your rm's capital stock increased from $100 million to $110 million in the course of this year. The depreciation rate is 20%. How much was your gross investment this year? A) $10 million B) $20 million C) $30 million D) $40 million Answer: C 4) Which of the following will unambiguously reduce the equilibrium real interest rate in a closed economy? A) higher government budget surplus; higher marginal product of capital B) higher government budget surplus; lower marginal product of capital C) lower government budget surplus; higher marginal product of capital D) lower government budget surplus; lower marginal product of capital Answer: B 5) Crowding Out refer to a situation where A) an increase in government spending reduces private consumption and investment B) a decrease in government spending increases private consumption and investment C) an increase in investment reduces government and private consumption D) a decrease in investment increases government and private consumption Answer: A l] A country's nancial account balance decreases if A] its current account balance increases. B] its income payment inows on foreign assets decrease. C] its domestic residents working abroad reduce the income they send home to their families. D] foreigners increase their purchases of its existing assets. Answer: A 2] If a French company sells wine to a U.S. company and uses the money to buy stock in a Spanish company, how does this affect the French balance of payments accounts? A] Decrease in financial account; increase in merchandise trade B] Decrease in merchandise trade; increase in financial account C] Decrease in net investment income from abroad; increase in nancial account D] Decrease in merchandise trade; increase in net income 'om abroad Answer: A 3] Suppose output is $l billion, government purchases are $2U billion, desired consumption is $Tl} billion, and desired investment is SZL} billion. Then net exports equal A] SEQ billion. B] 310 billion. C] -$l billion. D] -$2U billion. Answer: C 4] A small open economy experiences a decrease in domestic investment. This causes the world real interest rate to and the country's current account balance to A] fall; fall B] remain unchanged; fall C] fall; rise D] remain unchanged; rise Answer: D 5] A small open economy responds to high levels of government debt by sharply raising taxes. This causes the world real interest rate to and the country's current account balance to A] rise; fall B] remain unchanged; rise C] rise; rise D] remain unchanged; fall Answer: B