In an economy, desired consumption and investment are given by 35- cd - 4,500 + 0.20Y-5,000r = 3,000 - 4,000r 30- where Y is output and r is the real interest rate. 25- Government purchases are G = 2,000. 20- The equation for desired national saving is given by: IS, s4 - - 6,500 + 0.80Y + 5,000r. 154 When Y= 10,000, the equilibrium rate of interest is calculated to ber= 17%. 10 When Y= 10,200, the oquilibrium rate of intorost is calculated to be r= 15% 54 These equilibrium output and interest rate combinations are used to draw the initial IS curvo labolod Is, 10.1 Output, Y (thousands) 9.9 10.0 10.2 10.3 Now the level of government purchases increases to 2,500. Determine the equation for the now saving function Real interest rate, r

Refer to the figure below: CHANGE FROM PRIOR QUARTER (percent) +16 +12 +8 +4 Consumption ° -4 -8 יוון וון -12 -16 Investment -20 -24 Investment is more volatile than consumption. 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 2000 2001 2002 2003 2004 2005 CALENDAR QUARTER 2006 2007 2008 What was the range, in absolute value of percentage change, of the variation in quarterly growth rates between 2005 and 2008 of Instructions: Enter your responses as a percent rounded to the nearest whole number. (a) Consumer spending? 1 percent to 4 percent 3 percent to 7 percent 5 percent to 9 percent (b) Investment spending? 1 percent to 22 percent 3 percent to 30 percent 5 percent to 37 percent

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For a closed economy, GDP is $10, consumption is $8, taxes are $1, and the buget deficit is $1, What are private saving and national saving? a. $2 and $1 O b. $1 and $2 O c. $1 and $0 O d. $1 and $1

8. Given the following information: C = Ca + 0.8Yd Ip = 1900 - 40r G = 1800 NX = 700 - 0.14Y %D T= 200 + 0.20 Y Ca = 260 - 1Or Md/P = 0.25Y - 25r Ms/P = 2000 Find: 1. The equilibrium level of interest rate and output. 2. If Government expenditure increased by 100, find the new equilibrium level of interest rate and output

4. An economy has government purchases of 1000. Desired national saving and desired investment are given by gd=200+5000r+0.10Y-0.20G jd=1000-4000r When the full-employment level of output equals 5000, calculate the real interest rate that clears the goods market.

You observe a closed economy that has a government deficit and positive investment. Which of the following is correct? Select one: O a. Private saving is negative; public saving is positive. O b. Both private saving and public saving are negative. O . Private saving is positive; public saving is negative. O d. Private and public saving are both positive.

Suppose that conditions in the economy are such that the after-tax expected real interest rate is described by the equationRa = a X gWhere a is a number that depends on how people value their consumption in one period compared with another period, and g is the growth rate of the economy. The a equals 1 when people prefer consumption to be balanced, with the same amount of consumption each period; a may be bigger than the one when people prefer consumption today over consumption in the future, with a being larger and larger the more impatient people are:A - Suppose that a = 2, g = 0.02, the inflation rate is expected to be steady at pi = 0.03, and the tax rate is .40. What are the values of the equilibrium nominal interest rate and the before-tax expected real interest rate?B - Beginning with the situation in part a, if the growth rate of the economy increases to .04, what are the new values of the equilibrium nominal interest rate and the before-tax expected real interest rate?C-…

Real Interest Rate 1₂ 1. 4 FIGURE 25-2 1 11 12 13 -10 Quantity of Investment and Saving (5) Refer to Figure 25-2. Suppose national saving is reflected by NS, and investment demand is reflected by Now suppose the government implements a policy that encourages investment. What is the effect in th market for financial capital? Select one: a. National saving shifts to NS₁, investment demand shifts to 1₁D, and the quantity of national saving rises t b. There is no effect on NS or ID and the quantity of national saving supplied remains at I". c. National saving shifts to NS₁, and the quantity of national saving supplied rises to 12. d. Investment demand shifts to 1₁D and the quantity of national saving supplied rises to 1₁. e. Investment demand shifts to 1₁D, national saving shifts to NS₁, and the quantity of national

) A college is considering investing $6 million to add 10,000 seats to its football stadium.  The athletic department forecasts it can sell all these extra seats at each game for a ticket price of $20 per seat, and the team plays six home games per year.  If the school can borrow at an interest rate of 14%, should the school undertake this project?  (Show your math!) What would happen if the school expected a losing season and could sell tickets for only 5,000 of the seats?