【正文】 estment. Overinvestment in capital is possible because of diminishing marginal returns. A country can overinvest in capital if people would prefer to have higher consumption spending and less future growth. The opportunity cost of investing in human capital is also the loss of consumption that is needed to provide the resources for investment. A country could overinvest in human capital if people were too highly educated for the jobs they could get190。for example, if the best job a . in philosophy could find is managing a restaurant.8. a. When a German firm opens a factory in South Carolina, it represents foreign direct investment.b. The investment increases . GDP since it increases production in the United States. The effect on . GNP would be smaller since the owners would get paid a return on their investment that would be part of German GNP rather than . GNP.9. a. The United States benefited from the Japanese investment since it made our capital stock larger, increasing our economic growth.b. It would have been better for the United States to make the investments itself since then it would have received the returns on the investment itself, instead of the returns going to Japan.10. Greater educational opportunities for women could lead to faster economic growth in the countries of South Asia because increased human capital would increase productivity and there would be external effects from greater knowledge in the country. Second, increased educational opportunities for young women may lower the population growth rate because such opportunities raise the opportunity cost of having a child.11. a. Political stability could lead to strong economic growth by making the country attractive to investors. The increased investment would raise economic growth.b. Strong economic growth could lead to political stability because when people have high ines they tend to be satisfied with the political system and are less likely to overthrow or change the government.26章SOLUTIONS TO TEXT PROBLEMS:Quick Quizzes1. A stock is a claim to partial ownership in a firm. A bond is a certificate of indebtedness. They are different in numerous ways: (1) a bond pays interest (a fixed payment determined when the bond is issued), while a stock pays dividends (a share of the firm’s profits that can increase if the firm is more profitable)。 (2) a bond has a fixed time to maturity, while a stock never matures。 and (3) if a pany that has issued both stock and bonds goes bankrupt, the bondholders get paid off before the stockholders, so stocks have greater risk and potentially greater return than bonds. Stock and bonds are similar in that both are financial instruments that are used by panies to raise money for investment, both are traded on exchanges, both are subject to credit risk, and the returns to both are taxed (usually).2. Private saving is the amount of ine that households have left after paying their taxes and paying for their consumption. Public saving is the amount of tax revenue that the government has left after paying for its spending. National saving is equal to the total ine in the economy that remains after paying for consumption and government purchases. Investment is the purchase of new capital, such as equipment or buildings. These terms are related in two ways: (1) National saving is the sum of public saving and private saving, by definition. (2) National saving equals investment.3. If more Americans adopted a “l(fā)ive for today” approach to life, they would spend more and save less. This would shift the supply curve to the left in the market for loanable funds, causing the interest rate to rise. In equilibrium, there would be less saving and investment, and a higher interest rate.Questions for Review1. The financial system39。s role is to help match one person39。s saving with another person39。s investment. Two markets that are part of the financial system are the bond market, through which large corporations, the federal government, or state and local governments borrow, and the stock market, through which corporations sell ownership shares. Two financial intermediaries are banks, which take in deposits and use the deposits to make loans, and mutual funds, which sell shares to the public and use the proceeds to buy a portfolio of financial assets.2. It is important for people who own stocks and bonds to diversify their holdings because then they will have only a small stake in each asset, which reduces risk. Mutual funds make such diversification easy by allowing a small investor to purchase parts of hundreds of different stocks and bonds.3. National saving is the amount of a nation39。s ine that is not spent on consumption or government purchases. Private saving is the amount of ine that households have left after paying their taxes and paying for their consumption. Public saving is the amount of tax revenue that the government has left after paying for its spending. The three variables are related because national saving equals private saving plus public saving.4. Investment refers to the purchase of new capital, such as equipment or buildings. It is equal to national saving.5. A change in the tax code that might increase private saving is the introduction of a consumption tax to replace the ine tax. Since a consumption tax would not tax the returns to saving, it would increase the supply of loanable funds, thus lowering interest rates and increasing investment.6. A government budget deficit arises when the government spends more than it receives in tax revenue. Since a government budget deficit reduces national saving, it raises interest rates, reduces private investment, and thus reduces economic growth.Problems and Applications1. a. The bond of an eastern European government would pay a higher interest rate than the bond of the . government because there would be a greater risk of default.