Question 1

In macroeconomic analysis, why does one have to distinguish between consumption and investment expenditures?

Consumption and investment expenditures are determined by different factors.

Consumption expenditure is included in GDP, but investment expenditure is not.

Investment expenditure is included in GDP, but consumption expenditure is not.

Consumption expenditure has many sub-components, but investment does not.

Question 2

Suppose that the aggregate income in a country is $100 billion, aggregate private consumption is $60 billion, and total tax payment is $20 billion.

How much does the private sector save in this economy? (Answer in billions of dollars.)

Question 3

In the United States, government expenditure on goods and services as a share of GDP declined between the mid-1960s and late-1990s while the budget deficit was growing.

This outcome implies that __________.

taxes net of government transfers must have declined

the trade and current account balances must have declined

taxes must have declined while government transfers remained unchanged

taxes and government transfers must have both declined

Question 4

This year, country J has a private saving of $150 billion and investement of $180 billion. If the government's budget deficit is $20 billion, what would be the trade deficit? (Answer in billions of dollars.)

Question 5

During recessions, it is natural for an economy to consume less and invest more.

True

False

Question 6

This year, country K has a budget deficit of $30 billion, taxes are $70 billion, and government expenditures are $80 billion. How much did the government spend in providing transfers?

$0 billion

$20 billion

$40 billion

More information is needed

Question 7

This year in Country L, GDP is $500 billion, private consumption is $300 billion, government expenditure is $100 billion, and trade surplus is $20 billion. How much is total (public and private) domestic savings?

$80 billion

$150 billion

$120 billion

$100 billion

Question 8

Which of the following is a correct representation of the relationship between Trade Surplus (NX) and other macroeconomic variables [GDP (Y), Private Consumption (C), Government Consumption (G), Investment (I), Domestic Savings (S),Private Savings (S_p), and Government Savings (S_g)]?

NX=S_p+S_g

NX=Y-S

NX=S-I

NX=Y- (C-G-I)

Question 9

Which of the following could have contributed to high trade deficit in the United States?

Increase in private sector savings

Decline in private sector investment

Increase in government saving

Increase in budget deficit

1Question 10

Which of the following is a correct representation of Investment (I) in terms of other macroeconomic variables [GDP (Y), Private Consumption (C), Government Consumption (G), Trade Surplus (NX), and Domestic Savings (S)]? Select all that apply.

I=S-NX

I=S+NX

I= Domestic Saving + Foreign Saving

I=Y-C-G-NX