Module 2 Quiz
QUESTION 1
Historically, in nearly all years since 1929 private investment in the United States has been
a. more than 60 percent of GDP.
b. no more than 10 percent of GDP.
c. between 20 to 30 percent of GDP.
d. less than or equal to 20 percent of GDP.
QUESTION 2
Historical macroeconomic data of the United States shows that in the years between 1971 and 2019, government consumption as a share of GDP of American economy had
a. declined.
b. increased.
c. remained unchanged.
d. followed a U-shape trend, declining initially and then returning to its peak in 1971.
QUESTION 3
Trade deficit of an economy is always equal to
a. the negative of its foreign saving.
b. its domestic saving.
c. its foreign saving.
d. its private saving.
e. its public saving.
QUESTION 4
The government budget deficit in an economy is always equal to
a. the sum of private and public savings less investment.
b. the sum of private and foreign savings less investment.
c. the sum of domestic and foreign savings less investment.
d. the sum of private saving and investment less foreign saving.
e. the sum of foreign saving and investment less private saving.
QUESTION 5
In 2020, the GDP of the United States was $18.43 trillion. (All figures are in terms of constant 2012 dollars.) In that year, private consumption was $12.73 trillion, investment was $3.26 trillion, and government expenditure was $3.34 trillion. Based on the fundamental macroeconomic identity, how large was the US trade deficit?
a. $2.44 trillion.
b. $2.36 trillion.
c. $0.90 trillion.
d. -$0.90 trillion.
e. -$2.44 trillion.
QUESTION 6
In the first quarter of 2021 (2021Q1) in the United States, private consumption increased by $334.7 billion compared to its level in the previous quarter, 2020Q4. (All figures are in terms of constant 2012 dollars.) At the same time government expenditure went up by $51.1 billion, total investment declined by $44.7 billion, and GDP rose by $293.2 billion. Based on the fundamental macroeconomic identity, how much did the trade balance (net exports) change in 2021Q1 compared to 2020Q4?
a. Decreased by $137.3 billion.
b. Decreased by $47.9 billion.
c. Increased by $47.9 billion.
d. Increased by $137.3 billion.
e. Increased by $634.3 billion.
QUESTION 7
In the above question, if the budget deficit in 2021Q1 increased by $15.2 billion (in terms of constant 2012 dollars), by how much did private savings change?
a. Increased by $132.8 billion.
b. Increased by $77.4 billion.
c. Increased by $5.6 billion.
d. Decreased by $77.4 billion.
e. Decreased by $102.4 billion.
The decline in tax revenues and increased public expenditure due to the spread of COVID-19 increased the budget deficit in Thailand in 2020 compared to 2019. At the same time, the Thai government was concerned about the country’s trade deficit and followed policies that kept the 2020 trade deficit the same as in 2019. Investment also remained unchanged between 2019 and 2020. What must have happened to the private savings of Thai economy in 2020 compared to 2019?
a. The private savings in Thailand must have increased by the same amount that the budget deficit increased.
b. The private savings in Thailand must have increased by more than the amount that the budget deficit increased.
c. The private savings in Thailand must have increased by less than the amount that the budget deficit increased.
d. The private savings in Thailand must have decreased by the same amount that the budget deficit increased.
e. The private savings in Thailand must have decreased by more than the amount that the budget deficit increased.
QUESTION 9
Until 2019, India used to run large trade deficits. In 2020, the spread of COVID-19 reduced economic activity in the country and led to a drop in imports. Although India experienced an export decline as well, that was less than the import decline, the trade deficit in 2020 was much smaller than in 2019. At the same time, in 2020 the budget deficit of Indian government widened and private savings remained unchanged. What must have happened to investment in India in 2020 compared to 2019?
a. Investment must have increased.
b. Investment must have decreased.
c. Investment must have remained unchanged.
d. Investment may have risen or declined, depending on the situation.
QUESTION 10
The government of South Africa wants to adopt policies that increase investment in the country this year. It does not want to reduce its budget deficit and is unable to change private savings. If it proceeds with its pro-investment policies, it should expect the country’s trade deficit to
a. increase.
b. decrease.
c. remain unchanged.
d. decrease if the amount of increase in investment is large and increase otherwise.
