## Macro Module 19 Household savings practice exam questions

 Author Message NEAS Supreme Being Group: Administrators Posts: 4.3K, Visits: 1.3K Macro Module 19 Household savings practice exam questions(The attached PDF file has better formatting.)All cash flows occur on December 31. Values for years t and t-1 are        Item    Year t    Year t-1Real Government Spending    547    563Real Government Transfers    311    389Real Taxes    754    787Price Level     138    138Nominal Government Bonds at year-end    ?    659Nominal Interest Rate    4.39%    4.39%Private Consumption     959    953Private Capital    651    630Utilization Rate of Capital    82.86%    84.98%Depreciation Rate    8.73%    8.36%The government owns no capital but purchases all goods and services from the private sector.●    The price level does not change from year t-1 to year t.●    The money stock does not change from year t-1 to year t, so (Mt – Mt-1) = 0.●    Inflation is zero, so the nominal interest rate equals the real interest rate. Question 19.1: Nominal interest paidWhat is the interest paid by the government in year t on its outstanding bonds?Answer 19.1: 659 × 4.39% = 28.93(bonds outstanding at end of previous year × nominal interest rate on those bonds)Question 19.2: Real interest paidWhat is the real value of interest paid by the government in year t on its outstanding bonds?Answer 19.2: 659 × 4.39% / (138 / 100) = 20.96(bonds outstanding at end of previous year × nominal interest rate on those bonds)Question 19.3: Net cash expendituresWhat are the net cash expenditures (in real terms) by the government in year t?Answer 19.3: 547 + 311 – 754 + 20.96 = 124.96(net cash expenditures in real terms = government spending + government transfers – taxes + interest paid)Question 19.4: Government debtWhat is Bgt, nominal government bonds in year t? Answer 19.4: 659 + 124.96 × (138 / 100) = 831.44(bonds values are in nominal terms, so bonds in year t = bonds in year t-1 + real net government expenditures in year t × the price level)Question 19.5: Household savingsWhat is real household savings in year t? Answer 19.5: (651 – 630) + 831.44 / (138 / 100) – 659 / (138 / 100) = 145.96(real household savings = increase in capital + increase in real value of bonds) Attachments Macro Module 19 Household savings practice exam questions.pdf (448 views, 35.00 KB)
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