Assume that in this economy consumption (C) is given by the equation C = 600 + 0.6(Y – T). Investment (I) is given by the equation I = 2,000 – 100r, where r is the real rate of interest in percent terms. Taxes (T) are 500 and government spending (G) is also 500. What are the values of private saving, public saving, and national saving?

QUESTION NO. 3 Complete the following table and estimate the equilibrium levels of output and employment in this private closed economy, assuming that the level of investment is $16 billion and is independent of the level of total output. Employment (Millions) 40 45 50 55 60 65 70 75 80 GDP DI (Billions) 240 260 280 300 320 340 360 380 400 Consumption (Billions) 244 260 276 292 308 324 340 356 372 Saving (Billions) Investment (Billions) Aggregate Expenditures (Billions)

if consumers' disposable income increases due to a permanent tax cut - isn't it correct to say that consumption will definitely increase but the extent to which it does depends on the marginal propensity to consumer and save. Therefore the effect on private saving is ambiguous as T decreases but C increases.

? Scenario 1: Suppose savers either buy bonds or make deposits in savings accounts at banks. Initially, the interest income earned on bonds or deposits is taxed at a rate of 18%. Now suppose there is a decrease in the tax rate on interest income, from 18% to 14%. Shift the appropriate curve on the graph to reflect this change. This change in the tax treatment of saving causes the equilibrium interest rate in the market for loanable funds to fall spending to decrease and the level of investment Scenario 2: An investment tax credit effectively lowers the tax bill of any firm that purchases new capital within some relevant time period. Suppose the government implements a new investment tax credit. Shift the appropriate curve on the graph to reflect this change. The implementation of the new tax credit causes the interest rate to fall and the level of investment to fall Scenario 3: Initially, the government's budget is balanced; then the government significantly increases spending on…