Question 1

Which of the following best describes the relationship between national saving, investment, and the current account in an open economy?

Accepted Answer

$$S = I + CA$$

Question 2

Suppose a country has the following macroeconomic data: $$Y = 2000$$, $$NFP = 100$$, $$C = 1500$$, $$G = 300. $$What is the national saving $$S$$?

Accepted Answer

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

Question 3

If a government runs a budget deficit, which of the following is true, holding all else constant?

Accepted Answer

Government saving $$S_g is $$negative

Question 4

Which formula correctly represents private saving in the national accounts?

Accepted Answer

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

Question 5

A country has $$I = 400$$, $$NX = 50$$, and $$NFP = 20. $$What is its national saving $$S$$?

Accepted Answer

$$S = I + (NX + NFP) = 400 + (50 + 20) = 470$$

Question 6

Which of the following best explains why GDP does not measure a nation's wealth?

Accepted Answer

GDP is a flow variable, while wealth is a stock variable

Question 7

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

Accepted Answer

National saving is less than investment

Question 8

Given the equation $$S = Y + NFP - C - G$$, which of the following would increase national saving, ceteris paribus?

Accepted Answer

A decrease in government purchases $$G$$

Question 9

Which of the following is the correct formula for government saving?

Accepted Answer

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

Question 10

Suppose the government increases transfers ($$TR) $$and interest payments ($$INT) $$without changing taxes ($$T) or $$government purchases ($$G). $$What is the effect on government saving $$S_g$$?

Accepted Answer

Government saving decreases

Question 11

If household disposable income is $$Y_h = 1000$$ and household net saving is $$S_h = 50$$, what is the household saving rate?

Accepted Answer

$$\frac{S_h}{Y_h} = \frac{50}{1000} = 0.05$$

Question 12

Which of the following best describes the current account (CA)?

Accepted Answer

It records net payments with the rest of the world, including net exports and net factor payments

Question 13

If $$S_p = I + CA - S_g$$, what happens to private saving if the government budget deficit increases, holding investment and the current account constant?

Accepted Answer

Private saving must increase

Question 14

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

Accepted Answer

Government purchases $$G$$

Question 15

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

Accepted Answer

National saving exceeds domestic investment

Question 16

Suppose $$Y = 3000$$, $$NFP = 200$$, $$C = 2200$$, $$G = 500$$, $$T = 600$$, $$TR = 100$$, $$INT = 50. $$What is private saving $$S_p$$?

Accepted Answer

$$S_p = (Y + NFP - T + TR + INT) - C = (3000 + 200 - 600 + 100 + 50) - 2200 = (3000 + 200 - 600 + 100 + 50) - 2200 = (3000 + 200 = 3200; 3200 - 600 = 2600; 2600 + 100 = 2700; 2700 + 50 = 2750; 2750 - 2200 = 550)$$

Question 17

Which of the following would NOT increase national saving, holding all else constant?

Accepted Answer

An increase in government transfers $$TR$$

Question 18

If the national saving rate in Canada rose dramatically during COVID, which of the following is a plausible explanation based on the saving formula?

Accepted Answer

Household consumption $$C$$ fell sharply while disposable income remained stable or increased

Question 19

Which of the following best describes the difference between GDP and GNP?

Accepted Answer

GNP = GDP + Net Factor Payments ($$NFP)$$

Understanding Macroeconomic Data: Saving & Wealth in Macroeconomic Theory

Study Guide - Practice Questions

Study Guide - Flashcards