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

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

Accepted Answer

Net factor payments: payments received for factor services sold abroad minus payments for factor services bought from abroad.

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 calculates private saving ($S_p$) in the macroeconomic accounts?

Accepted Answer

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

Question 6

Suppose Canada’s GDP ($Y$) is $2$ trillion, net factor payments ($NFP$) are $0.1$ trillion, consumption ($C$) is $1.2$ trillion, and government purchases ($G$) are $0.4$ trillion. What is Canada’s national saving ($S$)?

Accepted Answer

$S = Y + NFP - C - G = 2 + 0.1 - 1.2 - 0.4 = 0.5$ trillion

Question 7

If the government runs a budget deficit, which of the following is true according to the formula $S_g = T - TR - INT - G$?

Accepted Answer

Government expenditures ($G$) plus transfers ($TR$) and interest ($INT$) exceed tax revenues ($T$).

Question 8

Which of the following best explains why saving is important for a nation’s wealth?

Accepted Answer

Saving allows for investment in capital stock and foreign assets, increasing national wealth over time.

Question 9

If Canada’s current account ($CA$) is positive, what does this imply about its international transactions?

Accepted Answer

Canada is receiving more payments from exports and factor services than it is paying for imports and foreign factor services.

Question 10

Given the formula for the household saving rate $\frac{S_h}{Y_{h}}$, what does a rise in $S_h$ relative to $Y_{h}$ indicate?

Accepted Answer

Households are saving a larger proportion of their disposable income.

Question 11

If private saving ($S_p$) is calculated as $S_p = I + CA - S_g$, what does an increase in the government budget deficit ($-S_g$) do to private saving, holding investment and current account constant?

Accepted Answer

Private saving must increase to offset the larger deficit.

Question 12

Which of the following is NOT included in the calculation of national saving ($S$) according to $S = Y + NFP - C - G$?

Accepted Answer

Net exports ($NX$)

Question 13

Suppose a country’s exports ($X$) are $500$ billion, imports ($M$) are $400$ billion, and net factor payments ($NFP$) are $50$ billion. What is the value of the current account ($CA$)?

Accepted Answer

$CA = NX + NFP = (500 - 400) + 50 = 150$ billion

Question 14

Which of the following would increase national saving ($S$) in the short run, holding other factors constant?

Accepted Answer

A decrease in government purchases ($G$)

Question 15

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

Accepted Answer

Investment exceeds national saving; the country is borrowing from abroad.

Question 16

Which of the following best describes the role of net factor payments ($NFP$) in the calculation of GNP?

Accepted Answer

GNP is calculated as $GDP + NFP$, adding income from abroad to domestic production.

Question 17

If the household saving rate in Canada rose dramatically during COVID, which of the following is a plausible explanation?

Accepted Answer

Households reduced consumption due to uncertainty, increasing the proportion of disposable income saved.

Question 18

Which of the following is a correct interpretation of the formula $S = I + CA$?

Accepted Answer

National saving finances both domestic investment and net lending to the rest of the world.

Question 19

If $S_p = Y_d - C$ and $Y_d$ increases while $C$ remains constant, what happens to private saving?

Accepted Answer

Private saving increases.

Understanding Macroeconomic Data: Saving & Wealth in Macroeconomic Theory

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