Question

Why do people save during their working lifetimes?

		They save for retirement especially if average life expectancy is higher.
		They save to prepare for those periods of unemployment.
		They may want to save for unexpected hospitalizations and illnesses.
		Each of these answers provides a valid explanation for why people save.

	If the interest rate rises from 5 percent to 9 percent, the number of new businesses will

		increase.
		decrease.
		remain the same.
		sharply increase, then level off.

The United States borrows a lot of money from other countries but has a trade surplus with all countries?

True

False

Answer 1

Answer to the first question is option four. Each of the answer provides the valid explanation. People save for retirement as well as for their hospitalization cost which also includes some unseen events such as being unemployed for a long period of time.

Answer to the second question is decrease. When the rate of interest is increased borrowing will be reduced and a number of new firms entered into the market will be reduced because startups will require a huge amount of initial investments. This is difficult when interest rate is higher.

The last question has an answer which is false. Trade deficit has been one of the most significant problems of the United States since past few years. The country which enjoy the trade surplus in 1990s has been suffering from trade deficits since last two decades.