1.You have two sets of estimates of national account numbers for a closed economy for next year. In the first set, government expenditures will be $30 billion, transfer payments will be $10 billion, and taxes will be $50 billion. Under the second set, GDP will be $200 billion, taxes will be $50 billion, transfer payments will be $20 billion, consumption will be $120 billion, and investment will be $30 billion. Based on these numbers, what are the respective estimated results?

a.$20 billion surplus and a $20 billion surplus

b.$20 billion surplus and a $20 billion deficit

c.$10 billion surplus and a $20 billion surplus

d.$10 billion surplus and a $20 billion deficit

2.Joe's Better Bike Company has $5 million in cash, which it has accumulated from retained earnings. It was planning to use the money to build a new factory. Recently, the rate of interest has increased. How does this fact influence the company's decision?

a.The increase in the rate of interest should not influence the decision to build the factory because Joe's Better Bike Company doesn't have to borrow any money.

b.The increase in the rate of interest should not influence the decision to build the factory because its shareholders are expecting a new factory.

c.The increase in the rate of interest should make it more likely that Joe's Better Bike Company will build the factory because a higher interest rate will make the factory more valuable.

d.The increase in the rate of interest should make it less likely that Joe's Better Bike Company will build the factory because the opportunity cost of the $5 million is now higher.

3.Suppose that investment rises and interest rates fall. Which statement best explains these changes?

a.The government has replaced the consumption tax with an income tax.

b.The government instituted an investment tax credit.

c.The government reduced the tax rate on savings.

d.The government repealed an investment tax credit.

4. Some civil society groups and activists propose a zero-economic-growth policy in order to preserve the environment. Discuss the pros and cons of this proposal.