Draw the Saving-Investment diagram and illustrate the effects of the following shocks on the equilibrium level of interest rate, investment, and saving.
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- Which sequence of events describes what is happening here? Real interest (%) azes SN SN new A Quantity of Saving and Investment in real $ bns p.SN=0.1 T.SN=T. Firms receive an investment tax credit, which reduces r and promotes growth. O b. Government increases spending, which increases national saving, lowers real interest rates, promotes investment and growth. O c. Government reduces spending, which decreases national saving, raises real interest rates, reduces investment and growth. O d. None of the answers offered are accurate. Oe Government reduGes snending which increases national saving loweES real interest rates, promotes G Search or type URL %23 2 8. Y R. 1. A. C. B.4. Assume that the economy is described by the following equations: Y=C+l+G, Y=8490, G-2719, T-2056, C-258+ 1/2(Y-T), I-400 + 40r. Private saving and the equilibrium interest rate are O Private saving: 2959; The interest rate: 47.4 O Private saving: 2296; The interest rate: 23.7 O Private saving: 2296; The interest rate: 47.4 O Private saving: 2959; The interest rate: 23.7According to the supply and demand model for saving, in a closed economy, an increase in the marginal product of capital will; Select one: O a. Produce an equal increase in the user cost of capital. O b. Decrease the aggregate level of saving. O C. Decrease the real interest rate and increase the level of investment. O d. Increase the real interest rate and increase the level of investment. e. Increase the real interest rate and decrease the level of investment.
- 1. Use a saving-investment diagram to explain what hap- pens to saving, investment, and the real interest rate in each of the following scenarios in a closed economy. ek ja. Current output rises due to a temporary produc- tivity increase. V b. The tax code changes so that business firms face ehigher tax rates on their revenue (offset by other eb on lump-sum tax changes so there's no overall change in tax revenue).Figure 32-1 percent 8 10 20 30 40 50 60 70 $billions Refer to Figure 32-1. In the Figure shown, if the real interest rate is 6 percent, the quantity of loanable funds demanded is O A. $20 billion, and the quantity supplied is $40 billion. O B. $20 billion, and the quantity supplied is $60 billion. O C. $60 billion, and the quantity supplied is $20 billion. O D. $60 billion, and the quantity supplied is $40 billion.From the diagram below we can see that: B 51.5 50 Julia's IC 0- 4950 Consumption now ($) Select one or more: O a. Julia would give up more than one unit of current consumption to get one additional unit of future consumption. O b. The marginal rate of transformation of future into current consumption is 1.5. c. Julia is indifferent between points A and B. O d. Julia values an additional unit of consumption now more highly than an additional unit of consumption later. Consumption later ($)
- Assume that the stock market experiences a massive rally, leading to a significant increase inhousehold wealth. Analyze the effects of this increase in household wealth:b. On national saving, investment, and the real interest rate (the goods market). Explain and showgraphicallyRefer to the figure below to answer the following questions. Real interest rate (percent per year) 10 DLF 150 300 450 600 750 900 Loanoble funds (billions of 2007 dollars) Figure 7.2.3 In Figure 7.23, when the real interest rate is 6 percent, the quantity of loanable funds demanded is Select one: O A $150 billion. O B. $450 billion. O C $600 billion. O D. $300 billion. O E. any amount less than $450 billion.Based on the information presented below, what is the equation representing the saving for this economy? GDP (Y) $0 100 200 300 Cunsumption (C) $60 120 180 240 Oa. S = -60 + 0.6Y O b. S = 60+ 0.4Y O c. S = -40 +0.75Y O d. S= -60+ 0.4Y Saving (S) S-60 -20 20 60 Investment (1) $100 100 100 100
- 6. Given the following Cobb-Douglas production function for Jordan Economy. Y = AK^0.7 L^0.3. What happens to the real rental price of capital (in percent) if capital stock increases by 10 percent? O. Real rental price of capital increases by 2.8 percent O. Real rental price of capital increases by A+ 2.9 percent O. Real rental price of capital increases by 6,9 percent O. Real rental price of capital decreases by 2.8 percent O. Real rental price of capital decreases by 6.9 percent O. None of the above is correctThe diagram below show the market for financial capital assuming that national income is constant at Y*. Suppose national saving is reflected by NS and investment demand is reflected by 10. If the real interest rate is i3, there is which will drive the interest rate up until it reaches i * A. an excess supply of national saving O B. an excess demand for private saving C. an excess demand for financial capital D. an excess supply of financial capital O E. an excess demand for investment O F. an excess supply of public saving Real Interest Rate i ₂ Bug NS0 Quantity of financial capital ($) NS1 18Assume there are no investment projects in the economy that yield an expected rate of return of 25 percent or more. But suppose there are $10 billion of investment projects yielding expected returns of between 20 and 25 percent; another $10 billion yielding between 15 and 20 percent; another $10 billion yielding between 10 and 15 percent; and so forth. a. Cumulate these data and present them graphically using the graph below, putting the expected rate of return (and the real interes rate) on the vertical axis and the amount of investment on the horizontal axis. Instructions: Use the tool provided 'ID' to plot the investment demand curve (plot 6 points total). 30 Tools ID 20 15 10 10 20 30 40 50 60 Investment (billions of dollars) Instructions: Enter your answers as a whole number. b. What will be the equilibrium level of aggregate investment if the real interest rate is: 15 percent: $ billion 10 percent: $ billion 5 percent: $ billion Expected rate of return, percent 25
