ECON 2010 LSU EXAM 2 QUESTIONS
AND CORRECT ANSWERS
A stock value is defined at a point in time (2) ✅✅CORRECT ANSW-wealth, debt
Capital gains ✅✅CORRECT ANSW-increase the value of existing assets
Capital losses ✅✅CORRECT ANSW-decreases the value of existing assets
Life-Cycle Saving ✅✅CORRECT ANSW-is used to meet long-term objectives.
Ex: Retirement, purchase a home, and children's college attendance
Precautionary saving ✅✅CORRECT ANSW-is for protection against setbacks
Ex: Loss of job, Medical Emergency
Bequest Saving ✅✅CORRECT ANSW-is to leave an inheritance
(mainly higher income groups)
The real interest rate = ✅✅CORRECT ANSW-nominal interest rate - inflation rate
Saving = ✅✅CORRECT ANSW-current income - spending on current needs
Wealth = ✅✅CORRECT ANSW-Value of assets - liabilities
Assets are ✅✅CORRECT ANSW-anything of value one owns
Liabilities are ✅✅CORRECT ANSW-the debts one owes
, A flow value is defined per unit of time (4) ✅✅CORRECT ANSW-Income, spending, saving, wage
Aggregate income formula (Y) ✅✅CORRECT ANSW-Y = C + I + G + NX
(C) Consumption expenditure
(I) Investment Spending
(G) Government purchases of goods and services
(NX) Net Exports
National Savings formula (S) = ✅✅CORRECT ANSW-S = Y - C - G
(Y) Aggregate income
(C) Consumption expenditure
(G) Government purchases of goods and services
Private saving is ✅✅CORRECT ANSW-household plus business saving
Public saving is ✅✅CORRECT ANSW-the amount of the public sector's income that is not spent on
current needs
(Public sector income is net taxes)
Public Saving formula (S public) = ✅✅CORRECT ANSW-S = T - G
(T) Net taxes
(G) Public sector spending on current needs
Balanced Budget occurs when ✅✅CORRECT ANSW-government spending equals net tax receipts
Government budget surplus is ✅✅CORRECT ANSW-the excess of government net tax collections
over spending
AND CORRECT ANSWERS
A stock value is defined at a point in time (2) ✅✅CORRECT ANSW-wealth, debt
Capital gains ✅✅CORRECT ANSW-increase the value of existing assets
Capital losses ✅✅CORRECT ANSW-decreases the value of existing assets
Life-Cycle Saving ✅✅CORRECT ANSW-is used to meet long-term objectives.
Ex: Retirement, purchase a home, and children's college attendance
Precautionary saving ✅✅CORRECT ANSW-is for protection against setbacks
Ex: Loss of job, Medical Emergency
Bequest Saving ✅✅CORRECT ANSW-is to leave an inheritance
(mainly higher income groups)
The real interest rate = ✅✅CORRECT ANSW-nominal interest rate - inflation rate
Saving = ✅✅CORRECT ANSW-current income - spending on current needs
Wealth = ✅✅CORRECT ANSW-Value of assets - liabilities
Assets are ✅✅CORRECT ANSW-anything of value one owns
Liabilities are ✅✅CORRECT ANSW-the debts one owes
, A flow value is defined per unit of time (4) ✅✅CORRECT ANSW-Income, spending, saving, wage
Aggregate income formula (Y) ✅✅CORRECT ANSW-Y = C + I + G + NX
(C) Consumption expenditure
(I) Investment Spending
(G) Government purchases of goods and services
(NX) Net Exports
National Savings formula (S) = ✅✅CORRECT ANSW-S = Y - C - G
(Y) Aggregate income
(C) Consumption expenditure
(G) Government purchases of goods and services
Private saving is ✅✅CORRECT ANSW-household plus business saving
Public saving is ✅✅CORRECT ANSW-the amount of the public sector's income that is not spent on
current needs
(Public sector income is net taxes)
Public Saving formula (S public) = ✅✅CORRECT ANSW-S = T - G
(T) Net taxes
(G) Public sector spending on current needs
Balanced Budget occurs when ✅✅CORRECT ANSW-government spending equals net tax receipts
Government budget surplus is ✅✅CORRECT ANSW-the excess of government net tax collections
over spending
