Macroeconomics
10th Edition
ISBN: 9781319105990
Author: Mankiw, N. Gregory.
Publisher: Worth Publishers,
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Question
Chapter 12, Problem 1PA
(a)
To determine
The short run impact of increased money supply on the interest rate, income, consumption, and investment.
(b)
To determine
The short-run impact of increased government purchases on the interest rate, income, consumption, and investment.
(c)
To determine
The short-run impact of increased taxes on the interest rate, income, consumption, and investment.
(d)
To determine
The short-run impact of increased government purchases and taxes on the interest rate, income, consumption, and investment.
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Consider a country whose economic structure matches the assumptions of the classical model. After reading a recent best-seller documenting a growing population of low-income elderly people who were ill prepared for retirement, most residents of this country decide to increase their saving at any given interest rate. Explain whether or how this could affect the following:
a. The current equilibrium interest rate
b. Current equilibrium real GDP
c. Current equilibrium employment
d. Current equilibrium investment
e. Future equilibrium real GDP
Which of the following best describes the catch-up effect?
Question 14 options:
It is easier for a country to grow fast and "catch up" with richer countries if it starts out relatively poor.
Saving will always "catch up" with investment spending.
If investment spending is low, increased saving will help investment to "catch up."
Rich countries aid relatively poor countries so as to help them "catch up."
"In the classical model, the equilibrium level of real
Gross Domestic Product (GDP) is completely
supply-determined." Do you agree or disagree?
Why?
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