1. Suppose that the government increases government purchases of goods and services by $100 billion. In response, investment and net exports do not change, but consumption increases by $50 billion, and nothing else changed. In this situation, the fiscal multiplier is equal to?

0

0.5

1

1.5

2

2. Suppose that in response to a $1,000 rebate, a household increases its consumption by $250. In this situation, the household's marginal propensity to consume is equal to?

0

0.25

0.5

1

3. Which of these is NOT a feature of the crowding out effect of government deficits?

Higher government debt

Lower private investment

Lower economic growth

Lower real interest rates

4. A country with a current account surplus is necessarily running a capital and financial account .

surplus OR deficit

5. Suppose that national saving is 20 percent of GDP and that investment equals 30 percent of GDP. In this situation, the economy must be running a current account .

surplus

deficit

uncertain

6. An open economy experiencing a current account surplus would experience interest rates if it were closed.

higher OR lower