Suppose that in a closed economy GDP is $11trillion, consumption is $7 trillion,

Question

Suppose that in a closed economy GDP is $11trillion, consumption is $7 trillion, taxes are $3 trillion and thegovernment runs a surplus of $1 trillion. What are private savingand national saving?

A.   $4 trillion and $1 trillion

B.   $4 trillion and $5 trillion

C.   $1 trillion and $2 trillion

D.   $1 trillion and $1 trillion

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Fred is considering expanding his dress shop. If interest ratesrise he is

A.   less likely to expand. This illustrates why thesupply of loanable funds slopes downward.

B.   more likely to expand. This illustrates why thesupply of loanable funds slopes upward.

C.   less likely to expand. This illustrates why thedemand for loanable funds slopes downward.

D.   more likely to expand. This illustrates why thedemand for loanable funds slopes upward.

Explanation / Answer

1)private savings is income that households have left after paying for theirtaxes andconsumption. National savings can be thought of as the amount of remaining moneythat is not consumed, or spent by government. In a simple model ofa closed economy, anything that is not spent is assumed to beinvested :
national savings is 11-7=4 million : private savings is 11-7-3=1million 2)the demand for a good goes up, so too does theprice (ceteris paribus). ... Moreover as we allknow demand curves slope down so as interestrates increase, ... demand andreduced supply for loanable funds, thus interest ratesrise. ... C) less likely to expand. This illustrateswhy the demand for loanable funds slopes downward
C) less likely to expand. This illustrateswhy the demand for loanable funds slopes downward

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