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4. Suppose that GDP Y equals 10, consumption C equals 6, government spending G equals 2, tax revenues T equal 3 and net exports NX equal 0. Use this information to answer the following questions. a. What is the numerical value of investment? b. What is the numerical value of national saving? c. What is the numerical value of private saving? d. What is the numerical value of public saving? 5. Please indicate whether each of the following statements is true or false (you don't need to explain why). a. A country with net exports that are negative is saving more than it is investing. b. A country with net exports that are negative is borrowing from the rest of the world. c. A firm, IBM for instance, borrows funds when it initially sells a bond to a saver, but not when that saver resells the bond in the secondary market. d. When a saver buys a bond issued by IBM, he or she is lending money to IBM; when by contrast that saver buys a share of stock issued by IBM, he or she is buying an ownership share in IBM. e. When funds flow from savers to borrowers through a financial intermediary, like a bank or mutual fund, that is called "direct finance.

3. Please indicate whether each of the following statements is true or false (you don't need to explain why). a. Although economists believe that access to natural resources helps increase productivity, they also point out that some countries, most notably Japan, have achieved high levels of productivity and living standards without access to abundant natural resources. b. Physical capital accumulation and the "catch-up effect" are particularly important in explaining why a number of Asian economies, especially South Korea's, grew very rapidly in the second half of the 20th century. c. Real GDP per person in India in 2008 was lower than what real GDP per person was in the United Kingdom in 1870. d. An example of "foreign portfolio investment" occurs when an American company opens up more than one factory in China and operates those factories itself in order to minimize risk. e. Students in the United States who remain in school after they turn 16 years old show a willingness to accept what economists call an "intertemporal trade-off," because staying in school means earning less income today and perhaps consuming less today, in exchange for accumulating knowledge and skills that will help them earn a higher income and enjoy more consumption in the future.

6. In the aftermath of the financial crisis of 2007 and 2008, many US policymakers have suggested that banks and other financial intermediaries should be subjected to tighter regulations. a. Suppose that the main effect of these tighter regulations is to restore savers' confidence in the financial system and that, as a result, they work to increase the amount that savers are willing to save at any given interest rate. According to the loanable funds framework, what effect will this change in saving behavior have on the amounts of saving and investment taking place in the economy: will saving and investment rise or fall? b. Still assuming that the main effect of these tighter regulations is to restore savers' confidence in the financial system and that, as a result, they work to increase the amount that savers are willing to save at any given interest rate, what does the loanable funds framework predict about the change in the interest rate: will it rise or fall? c. Suppose instead that the main effect of these tighter regulations is to make it more difficult for firms to borrow and that, as a result, they work to decrease the amount of investment that firms are willing to undertake at any given interest rate. According to the loanable funds framework, what effect will this change in firm behavior have on the amounts of saving and investment taking place in the economy: will saving and investment rise or fall? d. Still assuming that the main effect of these tighter regulations is to make it more difficult for firms to borrow and that, as a result, they work to decrease the amount of investment that firms are willing to undertake at any given interest rate, what does the loanable funds framework predict about the change in the interest rate: will it rise or fall?

7. Ann just graduated from college; she's looking for a job, but hasn't found one yet. Dan had been looking for a job; but after having no luck finding one for more than a year, he gives up and stops looking. a. When Ann graduates and starts looking for a job, does the number of employed people go up, down, or stay the same? b. When Ann graduates and starts looking for a job, does the number of unemployed people go up, down, or stay the same? c. When Ann graduates and starts looking for a job, does the number of people in the labor force go up, down, or stay the same? d. When Dan stops looking for a job, does the number of unemployed people go up, down, or stay the same? e. When Dan stops looking for a job, does the number of people in the labor force go up, down, or stay the same? 8. According to a microeconomic model of labor supply and demand, when the government increases the minimum wage: a. Does the number of employed people go up, down, or stay the same? b. Does the number of unemployed people go up, down, or stay the same? c. Does the number of people in the labor force go up, down, or stay the same? d. Does the natural rate of unemployment go up, down, or stay the same?