16) There has been some concern in the United States that people are not saving enough. This is a concern because
A) decreases in saving lead to decreases in labor productivity.
B) decreases in saving lead to decreases in investment.
C) decreases in saving lead to increases in the capital stock.
D) decreases in saving lead to increases in consumption in the future.
17) If all income is consumed in a year, then
A) investment spending will increase.
B) income next year will increase.
C) investment spending will be zero.
D) any investment spending will be done by the government.
18) Many countries find it difficult to achieve economic growth. This is because economic growth
A) is not understood well by economists, so it is difficult to advise policy makers on the best policies to pursue.
B) requires saving, and saving means less consumption today. A poor country may find it difficult to consume less today.
C) appears to be predetermined and not subject to factors that policy makers can have any affect on.
D) depends on technological change and technological change depends on noneconomic factors such as the growth rate of scientific knowledge.
19) It is likely that a small increase in a country's saving rate will have
A) a large effect on per capita real GDP many years later because the increase in saving leads to a slightly higher rate of economic growth which has large effects over time.
B) a large effect on per capita real GDP immediately because the increase in saving leads to a much larger rate of economic growth.
C) a small effect on per capita real GDP many years later because the increase in saving will have very little effect on the growth rate.
D) a small effect on per capita real GDP many years later because the increase in saving will be offset in later years by a decrease in the saving rate.
20) Countries with higher rates of saving
A) experience lower growth rates in the future.
B) have a large population.
C) have a greater number of poor people.
D) have higher rates of growth.
21) Economic growth depends on
A) low tax rates.
B) high government spending.
C) high rates of consumption.
D) increases in the capital stock as a result of saving.
22) Which one of the following is true?
A) Saving deters economic growth, because it takes money out of circulation.
B) Saving enables economic growth by providing for investment in the capital stock.
C) International comparisons have found no relationship between the rate of saving and the level of per capita real GDP.
D) Economies with sophisticated credit markets, such as the United States, have no need for saving.
23) Of the following nations, the country with the highest saving rate is
A) the United States.
24) Regarding the role of saving in economic growth, studies indicate that
A) there is a positive relationship between economic growth and saving.
B) there is no relationship between economic growth and saving.
C) there is a negative relationship between economic growth and saving.
D) there is both a positive and a negative relationship between economic growth and saving.
25) Which of the following is an important factor affecting economic growth?
A) the rate of saving
B) exchange rates
C) the rate of interest
D) the level of prices
26) An increase in a country's saving rate will tend to cause which of the following in the long run?
A) a reduction in per capita real GDP
B) an increase in economic growth
C) an increase in the unemployment rate
D) an increase in the rate of inflation
27) In order to be able to consume more in the future, you have to consume
A) less today and save the difference.
B) more today to increase supply.
C) more consumer goods.
D) fewer capital goods.
28) Higher saving rates mean higher future growth rates because
A) the interest earned from savings gives you more wealth.
B) the banks have more money to distribute to their shareholders.
C) saving contributes to less investment, which yields a larger capital stock.
D) saving contributes to more investment, which yields a larger capital stock.
29) In order for a nation to be able to consume more in the future, it needs to
A) consume less today in aggregate and save the difference between consumption and income.
B) consume more today in aggregate and borrow the difference between consumption and income.
C) produce more today in aggregate and save the difference between consumption and production.
D) produce less today in aggregate and save the difference between consumption and income.
30) Why are economic growth and saving related?