Question 1

Which of the following best describes the difference between GDP and national wealth?

Accepted Answer

GDP measures the total value of goods and services produced in a year, while national wealth is the stock of assets owned by a nation at a point in time.

Question 2

According to the formula $$S = Y + NFP - C - G$$, what does 'NFP' stand for?

Accepted Answer

Net Factor Payments

Question 3

If a country has a current account deficit, which of the following must be true?

Accepted Answer

Its national saving is less than its investment.

Question 4

Given the equation $$S = I + (NX + NFP)$$, what does a positive value for $$(NX + NFP)$$ indicate?

Accepted Answer

The country is a net lender to the rest of the world.

Question 5

Which formula correctly expresses private saving in terms of macroeconomic variables?

Accepted Answer

$$S_p = Y_d - C = (Y + NFP - T + TR + INT) - C$$

Question 6

Suppose the government increases transfer payments (TR) while keeping all other variables constant. According to $$S_p = (Y + NFP - T + TR + INT) - C$$, what is the effect on private saving?

Accepted Answer

Private saving increases.

Question 7

If $$S_g = T - TR - INT - G is $$negative, what does this imply about the government's fiscal position?

Accepted Answer

The government is running a budget deficit.

Question 8

Which of the following is NOT included in the calculation of national wealth?

Accepted Answer

Government purchases

Question 9

A country has the following data: $$Y = 1000$$, $$NFP = 50$$, $$C = 700$$, $$G = 200. $$What is its national saving $$S$$?

Accepted Answer

$$S = 1000 + 50 - 700 - 200 = 150$$

Question 10

If the household saving rate in Canada is given by $$\frac{S_h}{Y_{h}}$$, what does a decrease in $$S_h$$ relative to $$Y_{h}$$ indicate?

Accepted Answer

Households are saving a smaller proportion of their disposable income.

Question 11

Which equation best represents the relationship between national saving, investment, and the current account?

Accepted Answer

$$S = I + CA$$

Question 12

If Canada has a current account surplus, what does this imply about its saving and investment?

Accepted Answer

Canada's national saving exceeds its domestic investment.

Question 13

Which of the following would increase government saving $$S_g$$?

Accepted Answer

An increase in tax revenue (T)

Question 14

Given $$S_p = I + CA - S_g$$, if government saving $$S_g$$ decreases, what happens to private saving $$S_p ($$holding $$I$$ and $$CA$$ constant)?

Accepted Answer

Private saving increases.

Question 15

Which of the following best describes the role of saving in determining a nation's wealth?

Accepted Answer

Saving allows for investment, which increases the nation's capital stock and thus its wealth.

Question 16

If $$S = S_p + S_g$$ and $$S_p is $$negative while $$S_g is $$positive, what can be said about total national saving $$S$$?

Accepted Answer

National saving could be positive, negative, or zero depending on the magnitudes of $$S_p$$ and $$S_g.$$

Question 17

Which of the following is a plausible reason for a sharp increase in household saving rates, as seen in Canada during COVID?

Accepted Answer

Households reduced consumption due to uncertainty and increased disposable income from government transfers.

Question 18

If $$S = (Y + NFP) - C - G$$ and $$C$$ increases while all other variables remain constant, what happens to national saving?

Accepted Answer

National saving decreases.

Question 19

Which of the following best explains why the national saving rate $$\frac{S}{Y}$$ might have no obvious trend over time?

Accepted Answer

Changes in consumption, government policy, and external factors can offset each other, leading to a stable saving rate.

Understanding Macroeconomic Data: Saving and Wealth

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