Holding all else equal, the National Saving decreases when:Group of answer choicesthe value of the marginal product of capital fallsthe government budget moves from surplus to deficitgovernment expenditure fallsfirms increase their investment
Question
Holding all else equal, the National Saving decreases when:Group of answer choicesthe value of the marginal product of capital fallsthe government budget moves from surplus to deficitgovernment expenditure fallsfirms increase their investment
Solution
The National Saving decreases when the government budget moves from surplus to deficit. Here's why:
-
National Saving is the sum of private savings (by individuals and firms) and public savings (the government).
-
When the government budget moves from a surplus to a deficit, it means the government is spending more than it is earning.
-
This results in a decrease in public savings because the government has less money to save.
-
Holding all else equal, if public savings decrease, then the National Saving also decreases.
So, the correct answer is "the government budget moves from surplus to deficit".
Similar Questions
If private domestic saving and investment remain constant, an increase in the government budget deficit will Group of answer choicesreduce net exportsreduce national savingincrease net capital inflowsall of the other answers
In a closed economy with no government, the level of national saving is equal to the level of investment.Group of answer choicesTrueFalse
If domestic saving is less than domestic investment, then a country will have a __________ and __________ net capital inflows.Group of answer choicesbalance on merchandise trade; zerotrade surplus; negativetrade deficit; positivetrade deficit; negative
If household saving decreases by $4 million, business saving increases by $4 million and the government budget deficit decreases by $4 million, then private saving ____ and public saving ______.Group of answer choicesincreases; increasesdoes not change; decreasesincreases; decreasesdoes not change; increases
The introduction of new technologies:Group of answer choicesincreases the real interest rate and does not change the equilibrium quantity of national savingincreases the real interest rate and increases the equilibrium quantity of national savingincreases the real interest rate and decreases the equilibrium quantity of national savingdecreases the real interest rate and increases the equilibrium quantity of national saving
Upgrade your grade with Knowee
Get personalized homework help. Review tough concepts in more detail, or go deeper into your topic by exploring other relevant questions.