The table sets out the data for an economy when the government's budget is balanced. If the government's budget becomes a deficit of $3.0 billion and the Ricardo-Barro effect occurs, what are the real interest rate and investment? If the Ricardo-Barro effect occurs, and if the government's budget becomes a deficit of $3.0 billion, the real interest rate is percent a year and the quantity of investment is $ >>> Answer to 1 decimal place. billion. There crowding out in this situation because O A. is; investment is $8.0 billion but private saving is $11.0 billion, which means that investment is decreased by the amount of the government deficit OB. is no; the government budget deficit does not influence the real interest rate. Real interest rate (percent per year) 4 5 6 7 8 9 10 Loanable funds Loanable funds supplied demanded (billions of 2007 dollars) 8.5 8.0 7.5 7.0 6.5 6.0 5.5 7.5 8.0 8.5 9.0 9.5 10.0 10.5

The table sets out the data for an economy when the government's budget is balanced. If the government's budget becomes a deficit of $3.0 billion and the Ricardo-Barro effect occurs, what are the real interest rate and investment? If the Ricardo-Barro effect occurs, and if the government's budget becomes a deficit of $3.0 billion, the real interest rate is percent a year and the quantity of investment is $ >>> Answer to 1 decimal place. billion. There crowding out in this situation because O A. is; investment is $8.0 billion but private saving is $11.0 billion, which means that investment is decreased by the amount of the government deficit OB. is no; the government budget deficit does not influence the real interest rate. Real interest rate (percent per year) 4 5 6 7 8 9 10 Loanable funds Loanable funds supplied demanded (billions of 2007 dollars) 8.5 8.0 7.5 7.0 6.5 6.0 5.5 7.5 8.0 8.5 9.0 9.5 10.0 10.5

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter20: Exchange Rates And The Macroeconomy

Section: Chapter Questions

Problem 3TY

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The table sets out the data for an economy when the government's budget is balanced. If the government's budget becomes a deficit of $3.0 billion and the Ricardo-Barro effect occurs, what are the real interest rate and investment? If the Ricardo-Barro effect occurs, and if the government's budget becomes a deficit of $3.0 billion, the real interest rate is percent a year and the quantity of investment is $ billion. >>> Answer to 1 decimal place. There because O A. is; crowding out in this situation investment is $7.5 billion but private saving is $10.5 billion, which means that investment is decreased by the amount of the government deficit OB. is no; the government budget deficit does not influence the real interest rate. Real interest rate (percent per year) 456 & 9 7 8 9 10 Loanable funds Loanable funds demanded supplied (billions of 2007 dollars) 8.0 7.5 50 7.0 ܢ ܗ ܗ ܗ ܗܘ 6.5 6.0 5.5 5.0 7.0 7.5 8.0 8.5 9.0 9.5 10.0
The table sets out the data for an economy when the government's budget is balanced. The quantity of loanable funds demanded increases by $1.5 billion at each real interest rate and the quantity of loanable funds supplied increases by $0.5 billion at each interest rate. If, at the same time the government budget becomes a deficit of $1.0 billion, what are the real interest rate and investment? Does any crowding out occur? >>> Answer to 1 decimal place. The real interest rate is C ... percent a year. Investment is $ billion. There crowding out in this situation because O A. is; OB. is no; the deficit increases the real interest rate, which decreases investment investment is $6.5 billion. Real interest rate (percent per year) 4 5 6 7 8 9 10 Loanable funds Loanable funds supplied demanded (billions of 2007 dollars) 7.5 7.0 6.5 6.0 5.5 5.0 4.5 4.5 5.0 5.5 6.0 6.5 7.0 7.5
The table sets out the data for an economy when the government's budget is balanced. The quantity of loanable funds demanded increases by $1.5 billion at each real interest rate and the quantity of loanable funds supplied increases by $0.5 billion at each interest rate If, at the same time the government budget becomes a deficit of $1.0 billion, what are the real interest rate and investment? Does any crowding out occur? >>> Answer to 1 decimal place The real interest rate is Investment is $ billion. There OA. is, HI percent a year crowding out in this situation because OB. is no the deficit increases the real interest rate, which decreases investment investment is $7.0 billion Real interest rate (percent per year) 4 5 6 7 8 9 10 Loanable funds Loanable funds demanded supplied (billions of 2007 dollars) 8.0 7.5 7.0 6.5 6.0 5.5 5.0 5.0 5.5 6.0 6.5 7.0 7.5 8.0
Define saving and investment. Data for the simple economy of Newt show that in 2011, saving exceeded investment and the government is running a balanced budget.What is likely to happen ? What would happen if the government were running a deficit and saving were equal to investment ?
Suppose the GDP is $8 trillion, taxes are $1.5 trillion, private saving is $0.5 trillion, and public saving is $0.2 trillion. assuming this economy is closed, calculate consumption, government purchases national saving, and investment. b. imagine that government start with a balanced budget and then, because of an increase in taxes, start running a budget surplus. graphically analyze the effects of the budget surplus on interest rate, saving and investment if loanable funds means the flow of resources available from private saving
Economics In the figure, the DLF curve is the demand for loanable funds curve and the PDLF curve is the private demand for loanable funds curve. If there is no Ricardo-Barro effect, the figure Real interest rate (percent per year) 12- shows the situation in which the government has a so that the equilibrium real interest rate is equilibrium quantity of investment is 10- and the SLF 8- O A. budget deficit; 6 percent; $1.5 trillion B. budget deficit; 4 percent; $1 trillion 6- OC. budget surplus; 6 percent; $1.5 trillion D. budget surplus; 4 percent; $1 trillion E. balanced budget; 6 percent; $1.5 trillion 2- DLF PDLF 0- 2.0 Loanable funds (trillions of 2012 dollars) 0.5 1.0 1.5 2.5 3.0 O O O O O
Explain, using appropriate diagrams, how a rise in the household saving rate cancause a fall in GDP, and how a fiscal stimulus might offset this.
The table sets out the data for an economy when the government's budget is balanced. Real Loanable funds Loanable funds interest rate If the government's budget becomes a deficit of $1.0 billion, what are the real demanded supplied (percent per year) interest rate and investment? (billions of 2007 dollars) 4 7.5 4.5 Does crowding out occur? 7.0 5.0 6.5 5.5 ..... If the government's budget becomes a deficit of $1.0 billion, the real interest rate is 7 6.0 6.0 percent a year and the quantity of investment is $ >>> Answer to 1 decimal place. billion. 8 5.5 6.5 9. 5.0 7.0 10 4.5 7.5
Is is possible for federal investment to have a negative rate of return? Yes, if the spending results in a strong crowding-out effect or if state and local governments substitute towards federal investment by reducing stateand local investment. Either would potentially reduce future productivity and output (GDP), resulting in a negative return. Yes, if the spending results in a weak crowding-out effect or if state and local investments complement the increase in federal investment by. Either would potentially reduce future productivity and output (GDP) and hence result in a negative return. No. At worst, federal investment can have no future return as the expenditure offered some form of service (ex. jobs training) or useful infrastructure (ex. highways). No. If in the future there were a negative return, the federal government would increase expenditures again to offset it.
The Canadian federal budget moved from a surplus of 9.6billioninthe2007-2008 fiscalyeartoade ficitof5.8 billion the next year, and a large deficit of S55.6 billion in 2009-2010. a. Suppose real GDP was at potential in each of the first two years. What can you conclude about the cause of the change in the budget deficit? Show this change in a diagram of the budget deficit function. b. Suppose from 2008-2009 to 2009-2010, two things happened: real GDP fell and the government implemented an expansionary fiscal policy (both of which were true). Show these two separate events in a diagram of the budget deficit function.
The table shows the demand for loanable funds schedule and the supply of loanable funds schedule when the govemment budget is balanced. If the government budget deficit is $1.0 trillion, what are the real interest rate, the quantity of investment, and the quantity of private saving? Is there any crowding out in this situation? HEITI If the government budget deficit is $1.0 trillion, the real interest rate is percent a year If the government budget deficit is $1.0 trillion, the quantity of investment is $ trillion, and the quantity trillion. of private saving is $ S Is there any crowding out in this situation? OA. Yes. The deficit increases the real interest rate, which decreases investment. GELOO Real interest rate (percent per year) 4 677997 8 10 4 Loanable funds Loanable funds demanded supplied (trillions of 2012 dollars per year) 8.5 8.0 05 77761 7.5 7.0 6.5 05 6.0 5.5 5.5 6.0 6.5 7.0 7.5 8.0 8.5 6770 00
The table shows an economy's demand for loanable funds and supply of loanable funds schedules when the government's budget is balanced. The quantity of loanable funds demanded increases by $2.0 trillion at each real interest rate and the quantity of loanable funds supplied increases by $1.0 trillion at each interest rate. If, at the same time the government budget becomes a deficit of $1.0 trillion, what are the real interest rate, the quantity of loanable funds, investment, and saving? >>> Answer to 1 decimal place. Real interest rate (percent per year) Loanable funds Loanable funds demanded supplied (trillions of 2012 dollars per year) 4 7.5 6.5 5 7.0 7.0 6 6.5 7.5 7 6.0 8.0 8 5.5 8.5 9 5.0 9.0 10 4.5 9.5 The real interest rate is 7 percent a year. The quantity of loanable funds is $ trillion, investment is $ trillion, and saving is $ trillion.