Economics:
10th Edition
ISBN: 9781285859460
Author: BOYES, William
Publisher: Cengage Learning
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Chapter 10, Problem 3E
To determine
To illustrate:
The hypothetical economy graphically. Also, show the effect of an increase in autonomous saving.
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Draw a graph representing a hypothetical economy. Carefully label the two axes, the S + T + IM curve, the I + G + EX curve, and the equilibrium level of the real GDP. Illustrate the effect of an increase in the level of autonomous saving.
Classify each of the following based on the macroeconomic definitions of saving and investment.
Saving
Investment
Neha borrows money to build a new lab for her engineering firm.
Teresa purchases stock in Pherk, a pharmaceutical company.
Sam purchases a new condominium in San Francisco.
Lorenzo purchases a certificate of deposit at his bank.
Complete the following table. Calculate the level of consumption and savings.
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- Consider an economy described by the following equations:Y=C + I +GY=7,000G=4000T=2,000C=150+0.75(Y-T)I=1,000-50rc. Now suppose the G rises by 1,000. Compute private saving, public saving, andnational saving and show a graphical representation of your answer.arrow_forwardUsing a suitable graph, what is the effect on national income if people increase autonomous saving?arrow_forwardPlease explain how a rise in the household saving rate can cause a fall in GDP?arrow_forward
- true/false explain When savings equals investment, reducing savings and increasing consumption is especially effective in stimulating output.arrow_forwardb. Explain the difference between saving and investment as defined by a macroeconomist. c. Which of the following situations in c (i) & c (ii) represent investment? Saving? Explain(i) Your family takes out a mortgage and buys a new house. (ii) You use your paycheque to buy stock in Sagicor Financial Services.arrow_forwardconsumption and investment: C = 1,000 + (2/3)*(Y – T) and I = 1,200 – 100*r. Furthermore, Y = 8,000, G = 2500, T = 2,000. Calculate the national saving.arrow_forward
- Classify each of the following based on the macroeconomic definitions of saving and investment. Saving Investment Crystal borrows money to build a new lab for her engineering firm. Hilary purchases stock in Pherk, a pharmaceutical company. Edison takes out a mortgage for a new home in Detroit. Brian purchases a corporate bond issued by a car company.arrow_forwardThe following table contains data for a hypothetical closed economy that uses the dollar as its currency. Suppose GDP in this country is $900 million. Enter the amount for consumption. National Income Account Government Purchases (G) Taxes minus Transfer Payments (T) Consumption (C) Investment (I) Value (Millions of dollars) 250 325 275 Complete the following table by using national income accounting identities to calculate national saving. In your calculations, use data from the preceding table. National Saving (S) millionarrow_forwardExplain how each of the following will affect the consumption and saving schedules (as they relate to GDP) or the investment schedule, other things equal:a. A large increase in the value of real estate, including private houses.arrow_forward
- The Economist article, "Low interest rates leave savers with few good options", states that savers are likely to respond to low rates in one of the following three ways: Lincrease athletic activity, go back to school, or, spend more on entertainment O re-watch the movie Trading Places, invest in Treasury bills, or, move to Germany save more and spend less, set aside less money due to higher returns, or, decrease investments in risky assets save less and spend more, set aside more money to make up for low returns, or, increase investments in risky assetsarrow_forwardIf consumers decide to increase saving, then C decreases, r decreases, I increases, and Y:arrow_forwardSuppose that GDP is $8 billion, taxes are $1.5 billion, private saving is $0.5 billion, andpublic saving is 0.2 billion. Assuming the economy is closed, calculate the size of:Consumption and Investmentarrow_forward
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