An explanation for the low saving rate in the United States consistent with the life-cycle reason for saving includes:
A. large and persistent capital gains.
B. households spending beyond their means to keep up with community standards.
C. relatively generous government assistance for the elderly and large down payments required for home purchases.
D. highly-developed financial systems making it easy to buy homes with down payments under 15 percent.
Answer: D
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Evidence to support the Ricardo-Barro effect would show that
A) government budget deficits have no effect on the real interest rate or investment. B) higher government budget surpluses decrease investment. C) higher government budget deficits decrease investment. D) higher government budget deficits raise the real interest rate. E) government budget deficits increase household consumption.
Why may equity finance be preferred to debt finance for developing countries?
A) A fall in domestic income automatically reduces the earnings of foreign shareholders without violating any loan agreement. B) There are laws insuring against any default with equity finance. C) The risk is shared between debtor and creditor with debt finance. D) The tax structure leaves equity finance unconstrained. E) Repayments are unaffected by falls in real income.
John Rawls's views on income distribution and fairness can best be described by the statement:
A. The lesser individuals' duty should be to work for the well-being of the brightest individuals. B. A high level of income inequality is necessary to sustain the arts, beauty, education, and civilization. C. Property rights should be equally distributed, and the market should determine the distribution of income. D. Society's goal should be to maximize the welfare of the least well-off, but some inequality is necessary to meet this goal.
In order for large countries to successfully use tariffs to increase well-being,
A) they must have significant market power . B) the deadweight loss created by the tariff must be greater than the government revenue the tariff generates. C) domestic production must increase more significantly than for the small country case. D) domestic consumption and imports must decrease more significantly than in the small country case.