81.Whenthegovernmentrunsabudgetdeficit,
a.interestratesarelowerthantheywouldbeifthebudgetwerebalanced.
b.nationalsavingishigherthanitwouldbeifthebudgetwerebalanced.
c.investmentislowerthanitwouldbeifthebudgetwerebalanced.
d.Alloftheabovearecorrect.
82.SupposetheCongressandpresidentdecreasedthemaximumannualcontributionslimitstoretirementaccountsandatthesametimereducedthebudgetdeficit.Whatwouldhappentotheinterestrate?
a.Itwoulddecrease.
b.Itwouldincrease.
c.Itwouldstaythesame.
d.Itmightdoanyoftheabove.
83.Whichofthefollowingeventscouldexplainadecreaseininterestratestogetherwithanincreaseininvestment?
a.Thegovernmentwentfromsurplustodeficit.
b.Thegovernmentinstitutedaninvestmenttaxcredit.
c.Thegovernmentreducedthetaxrateonsavings.
d.Noneoftheaboveiscorrect.
84.Whichofthefollowingeventscouldexplainanincreaseininterestratestogetherwithadecreaseininvestment?
a.Thegovernmentbudgetwentfromsurplustodeficit.
b.Thegovernmentinstitutedaninvestmenttaxcredit.
c.Thegovernmentreducedthetaxrateonsavings.
d.Noneoftheaboveiscorrect.
85.Whichofthefollowingeventscouldexplainanincreaseininterestratestogetherwithanincreaseininvestment?
a.Thegovernmentrunsalargerdeficit.
b.Thegovernmentinstitutesaninvestmenttaxcredit.
c.Thegovernmentreplacestheincometaxwithaconsumptiontax.
d.Noneoftheaboveiscorrect.
86.Interestratesfallandinvestmentfalls.Whichofthefollowingcouldexplainthesechanges?
a.Thegovernmentgoesfromasurplustoadeficit.
b.Thegovernmentrepealsaninvestmenttaxcredit.
c.Thegovernmentreplacesaconsumptiontaxwithanincometax.
d.Noneoftheaboveiscorrect.
87.Thesupplyofloanablefundswouldshifttotherightifeither
a.taxreformsencouragedgreatersavingorthebudgetdeficitbecamesmaller.
b.taxreformsencouragedgreatersavingorinvestmenttaxcreditswereincreased.
c.thebudgetdeficitbecamelargerorinvestmenttaxcreditswereincreased.
d.thebudgetdeficitbecamelargerortaxreformsdiscouragedsaving.
88.Achangeinthetaxlawsthatincreasesthesupplyofloanablefundswillhaveasmallereffectoninvestmentwhen
a.thedemandforloanablefundsismoreelasticandthesupplyofloanablefundsismoreinelastic.
b.thedemandforloanablefundsismoreinelasticandthesupplyofloanablefundsismoreelastic.
c.boththedemandforandsupplyofloanablefundsaremoreelastic.
d.boththedemandforandsupplyofloanablefundsaremoreinelastic.
89.Agovernmentbudgetdeficitaffectsthesupplyofloanablefunds,ratherthanthedemandforloanablefunds,because
a.inourmodeloftheloanablefundsmarket,wedefine“loanablefunds”astheflowofresourcesavailabletofundprivateinvestment.
b.inourmodeloftheloanablefundsmarket,wedefine“loanablefunds”astheflowofresourcesavailablefromprivatesaving.
c.marketsforgovernmentdebtarefundamentallydifferentfrommarketsforprivatedebt.
d.ofourassumptionthattheeconomyisclosed.
90.Ifweweretochangetheinterpretationoftheterm“loanablefunds”insuchawaythatgovernmentbudgetdeficitswouldaffectthedemandforloanablefunds,ratherthanthesupplyofloanablefunds,then
a.crowdingoutwouldnotbeaconsequenceofanincreaseinthebudgetdeficit.
b.higherinterestrateswouldnotbeaconsequenceofanincreaseinthebudgetdeficit.
c.anincreaseinthebudgetdeficitwouldcausethedemandforloanablefundstodecrease.
d.wewouldbemakingonlyasemanticchangeinhowweanalyzetheeffectsofgovernmentbudgetdeficits.
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