Question

14. Suppose instead that T < G. Does the investment rate still equal the private savings rate? If the savings Tate is 20% and the deficit is 5% of GDP, what in the investment rate? A. 25% B. 20% C. 15% D. 10% 15. Suppose capital per worker increases from 2 to 3. We know that this increase will cause what to happen to output per worker in the same period? A. output per worker to increase. B. output per worker to remain constant. C. output per worker to fall. D. The effect is ambiguous. In the open economy goods market model, the intersection of the demand for do- mestic goods and the domestic demand for goods identifies what for the demand for domestic goods? A. The Mundell-Fleming Condition B. The value of output for which net exports equal zero. 16. C. The Marshall-Lerner Condition D. Equilibrium output 17. A tariff is: A. a foreign bond. B. an order for foreign goods that have not yet been delivered. C. a barter arrangement between importers and exporters. D. a tax on imported goods.

Answer 1

Answer 14:

No, in case of deficit in government budget, investment rate is not equal to savings rate. Investment + Government expenditure = Savings + taxes , thus, Savings - Investment = G - T, thus investment = 20 - 5 = 15 per cent of GDP.

Thus, Option C is correct.

Answer 15:

Option A. Increase in capital per worker in the economy will lead to increase in output per worker in the economy.

Answer 16:

Option B. It determines the level of output for which net exports are equal to zero.

Answer 17:

Option D. A tariff refers to the tax on imported goods.