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- Answer the following question using well created graphs. Create a closed economy that is in a state of equilibrium at first. Assume that public saving decreases dramatically. Demonstrate how changes in interest rates (and a related variable) may bring the market into equilibrium after illustrating how changes in public savings affect the graph. What is the impact of a tiny open economy (with fixed interest rates) on the analysis?Assume a country would like to increase investment by limiting consumption. What would be the point of a policy like that? What would be the impact on the economy? Who would benefit? Who would lose out?The following information is provided about an open economy with a government. Use the information to answer the questions that follow:C = 450 + 0.4Y I = 350G = 150X = 70Z = 35 + 0.1Y T = 0.15YYf = 1550Q 2.4 Calculate the tax revenue to the government of this country when the economy (2) remains in equilibrium.Q 2.5 Calculate what the new equilibrium income should be if the government of this (6) country decides to cancel all taxes, implying the tax rate would now be 0%.Q2.6 Before the government decreased the tax rate, how much of government spending was required to bring the economy to full employment?
- Scenario 1. Assume the following information for an imaginary, closed economy. GDP = $100,000; taxes = $22,000; government purchases = $25,000; national saving = $15,000. Refer to Scenario 1. This economy’s government is running aConsider the economy of Canada. Its households spend 55% of increases in their income and saves 45 %. There are no taxes and no foreign trade. Currently, Canada has a recessionary gap, the governments aim is to get actual output to increase by 220 billion dollars. How much of a tax cut do they need to have to achieve the overall increase in output of 220 billion dollars?Assume the following information for an imaginary, closed economy. GDP = $120,000; consumption = $70,000; private saving = $9,00%3; national saving = $12,000. (Please write the calculation details) %3D %3D %3D (1) For this economy, what does investment amount to (2) For this economy, what do government purchases amount to? (3) For this economy, what do taxes amount to? (4) Is this economy's government budget surplus or budget defcit? How much it is?
- The figure below shows national saving (NS) and investment demand (1D ) for the hypothetical country of Slovappa. Real GDP is equal to potential GDP. The numbers are in billions of dollars. Assume the economy's national saving is NSo and investment is IDo- NSo NS Quantity of Investment and Saving (S) Suppose that at this level of national saving, the government of Slovappa has a budget deficit of $100. If the country's level of national saving is $200, then private saving must be $ a) 300 b) 100 c) 200 Real Interest RateThe current Ukraine-Russia War threatens the prosperity of the global economy, and as such, the UK economy. You are working as an Economist for the HM Treasury and a panel of Members of Parliament have asked you to provide guidance on the current situation of the economy and potential demand side and supply side policy interventions to stabilise the economy. Using economic theory, answer the following: a. Discuss how this global event, outlined above, could cause actual growth to deviate away from its potential output in the UK. Why could it be suggested that there maybe longer run impacts to the UK's productive capacity? b. To what extent could deviations in UK real output and the interest rate cause changes in the equilibrium and disequilibrium level of unemployment?Suppose the following equations represents a closed economy: Y= C + I + G Y = 4000 G = 500 T = 500 C = 500 + 0.7 (Y – T) I = 1000 – 40r In this economy, compute the value of consumption (C), private saving, public saving, and national saving. Also, find the equilibrium interest rate (r). Now suppose that government spending (G) rises (expansionary fiscal policy) to 300. Compute private saving, public saving, and national saving. Also, find the new equilibrium interest rate (r). In part (b), due to expansionary fiscal policy (increase in government spending), which of the two other components of aggregate demand changes, C or I? Why? (Hint: Note the real interest rate)
- The current Ukraine-Russia War threatens the prosperity of the global economy, and as such, the UK economy. You are working as an Economist for the HM Treasury and a panel of Members of Parliament have asked you to provide guidance on the current situation of the economy and potential demand side and supply side policy interventions to stabilise the economy. Using economic theory, answer the following: a. Discuss how this global event, outlined above, could cause actual growth to deviate away from its potential output in the UK. Why could it be suggested that there maybe longer run impacts to the UK's productive capacity? b. To what extent could deviations in UK real output and the interest rate cause changes in the equilibrium and disequilibrium level of unemployment? c. "Any volatility in output and unemployment because of the War would be due to slow market adjustment. Domestic policymaking should be focussed towards re-correcting any longer run rigidities over short run demand…Even during a financial recession, consumers tend to increase spending in _______An open economy is in equilibrium when Y = C + I + G + X - M where Y = national income; C = consumption; I = investment; G = government expenditure; X = exports; and M =imports. Determine the equilibrium level of income given that C = 0.8 Y+ 80; I = 70; G =130; X =100 , and M = 0.2Y + 50.