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ECON 101 Lecture Notes - Lecture 15: Mutual Fund, Autarky, General Motors

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rosealpaca119
18 Oct 2016
School
SDSU
Department
Economics
Course
ECON 101
Professor
L.Brunstein

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Document Summary

Ch 13: saving, investment, and the financial systems. The financial system: the group of institutions that helps match the saving of one person with the investment of another. Financial intermediaries: institutions through which savers can indirectly provide funds to borrowers. Mutual funds: institutions that sell shares to the public and use the proceeds to buy portfolios of stocks and bonds. = the portion of households" income that is not used for consumption or paying taxes. The portion of national income that is not used for consumption of government purchases. For the rest of this chapter focus on the closed economy case. An excess of tax revenue over govt spending. A shortfall of tax revenue from government spending. Private saving is the income remaining after households pay their taxes and pay for consumption. Examples of what house do with savings. Purchase a certificate of deposit at the bank. Let accumulate in saving or checking acct.

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Related Questions

1. A decrease in investment spending that results from an increase in government borrowing is called

a.) a deficit

b.) a surplus

c.) a liability

d.) crowding out

 

2. In a closed economy:

a.) national saving equals net worth

b.) there are no taxes

c.) there is no interaction with other countries

d.) there is no government

 

3. If we calculate income minus taxes minus consumption, then we are left with:

a.) national saving

b.) investment

c.) public saving

d.) private saving

 

4. In the financial market, ____ are supplying the funds and ____ are demanding the funds.

a.) governments: people

b.) foreigners: banks

c.) borrowers: savers

d.) savers: borrowers

The national accounting of country M is reported as follows:

Y (GDP) = 100 (in billions)

C (consumption) = 80

I (domestic investment) = 20

G (government purchase) = 25

T (net taxes) = 10

FA (private capital flow) = +15 (credit)

a) Is the country a net exporter or net importer?

b) How large is the private saving, public saving, and national saving, respectively?

c)How large is the net foreign investment? Is country M a lender or borrower?

d) If country M adopts a fixed exchange rate system, what kind of exchange pressure does its monetary authority face?

Suppose an economy’s national accounts are GNP = 100, C = 70, I = 40, G = 20 and EX = 20 where GNP is gross national product, C is consumption, I is investment, G is government spending, and EX is exports. Using the national income identity, find the value of imports (IM). What is the current account balance? What is the (economy-wide) savings rate? What would the government, private, and total savings rate be if the government reduced taxes T = 10 while the other variables remain unchanged?