cause political instability but would also discourage savings and investment. These are necessary for economic growth.

POINTS: -- / 1

5. Differentiate between inward-oriented policies and outward-oriented policies.

RESPONSE:

ANSWER: Inward-oriented policies are aimed at raising productivity and living standards within

a county by avoiding interaction with the rest of the world. This approach involves the protection of domestic industries to allow them to develop and grow without competition from foreign firms.

Outward-oriented policies are designed to integrate

CHAPTER 26: SAVING, INVESTMENT, AND THE FINANCIAL SYSTEM

countries into the world economy as international trade is considered to be a factor in generating economic growth.

POINTS: -- / 1

True/False

Indicate whether the statement is true or false.

1. Private savings are the tax revenue that the government has left after paying for its spending; and public savings is the income that households have left after paying for taxes and consumption.

ANSWER: F

POINTS: 0 / 1

2. A budget deficit is an excess of tax revenue over government spending; and a budget surplus is a shortfall of tax revenue from government spending.

ANSWER: F

POINTS: 0 / 1

3. A budget surplus decreases the supply of loanable funds, increases the interest rate, and stimulates investment.

ANSWER: F

POINTS: 0 / 1

4. The financial system is the group of institutions in the economy that help to match one person's