Q: Which of the following correctly expresses the household saving rate?

$$\text{Household Saving Rate} = \frac{S_h}{Y_{h}}$$

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.

Question 2

Given the formula for national wealth: $$	ext{National Wealth} = 	ext{Domestic Capital Stock} + 	ext{Foreign Assets} - 	ext{Foreign Liabilities}$$, what would happen to national wealth if foreign liabilities increase, holding all else constant?

Accepted Answer

National wealth would decrease.

Question 3

Which equation correctly represents total national saving in an open economy?

Accepted Answer

$$S = Y + NFP - C - G$$

Question 4

Private saving ($$S_p) $$can be expressed as:

Accepted Answer

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

Question 5

If a government runs a budget deficit, which of the following is true regarding government saving ($$S_g$$)?

Accepted Answer

$$S_g is $$negative.

Question 6

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

Accepted Answer

$$S = I + CA$$

Question 7

Suppose Canada has the following data: $$Y = 2000$$, $$NFP = 100$$, $$C = 1500$$, $$G = 300. $$What is total national saving ($$S$$)?

Accepted Answer

$$S = Y + NFP - C - G = 2000 + 100 - 1500 - 300 = 300$$

Question 8

The current account ($$CA) is $$defined as:

Accepted Answer

$$CA = NX + NFP$$

Question 9

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

Accepted Answer

National saving is less than investment.

Question 10

Which of the following correctly expresses the household saving rate?

Accepted Answer

$$	ext{Household Saving Rate} = \frac{S_h}{Y_{h}}$$

Question 11

If $$S = I + CA$$ and $$CA is $$negative, what does this imply about the relationship between saving and investment?

Accepted Answer

Saving is less than investment.

Question 12

Which of the following is NOT included in the calculation of private saving?

Accepted Answer

Government purchases ($$G)$$

Question 13

If the government increases transfers ($$TR) $$and interest payments ($$INT$$), what is the likely effect on private saving ($$S_p$$), holding all else constant?

Accepted Answer

Private saving increases.

Question 14

Which formula best represents government saving ($$S_g$$)?

Accepted Answer

$$S_g = T - TR - INT - G$$

Question 15

If $$S_p = I + CA - S_g$$, what does a decrease in government saving ($$S_g) $$imply for private saving ($$S_p$$), holding investment and current account constant?

Accepted Answer

Private saving increases.

Question 16

Which of the following is a plausible reason for a sharp increase in household saving rates during a crisis such as COVID-19?

Accepted Answer

Households reduce consumption due to uncertainty, increasing saving.

Question 17

If $$S = I + (NX + NFP)$$, what does a positive value for $$(NX + NFP)$$ indicate about the country's international transactions?

Accepted Answer

The country has a current account surplus.

Question 18

Which of the following best describes the relationship between saving and investment in a closed economy?

Accepted Answer

Saving equals investment.

Question 19

Suppose the government increases taxes ($$T) $$while keeping transfers ($$TR$$), interest payments ($$INT$$), and government purchases ($$G) $$constant. What is the effect on government saving ($$S_g$$)?

Accepted Answer

Government saving increases.

Question 20

If $$S = S_p + S_g$$ and $$S_p$$ increases while $$S_g$$ decreases by the same amount, what happens to total national saving ($$S$$)?

Accepted Answer

Total national saving remains unchanged.

Understanding Macroeconomic Data: Saving and Wealth in Macroeconomic Theory

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