Macroeconomics (Fourth Edition)
4th Edition
ISBN: 9780393603767
Author: Charles I. Jones
Publisher: W. W. Norton & Company
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Question
Chapter 16, Problem 8E
a)
To determine
Explain the effect in household debt to GDP changes and personal saving rate.
b)
To determine
Possible explanation for the changes.
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Unlike households, governments are often able to sustain large debts. For example, in 2019, the U.S. government’s total debt reached $21.2 trillion, approximately equal to 105.3% of GDP. At the time, according to the U.S. Treasury, the average interest rate paid by the government on its debt was 1.3%. However, running budget deficits becomes hard when very large debts are outstanding.
A) Calculate the total increase in national debt if the government incurs a deficit of $600 billion in 2020. Enter your answer in billions of dollars and round to the nearest tenth.
- Debt Increase: $ (Billion)
B) At what rate would GDP have to grow in order for the debt–GDP ratio to remain unchanged when the deficit in 2020 is $600 billion? Enter your answer as a percentage and round your answer to the nearest hundredth of a percent.
- Rate of GDP Growth: (%)
Problem Set 4: Saving and Investment
Economists in Fantasialand, a closed economy, have collected the following information about the economy for a particular year: Y = 9000; C = 6000; T = 1500; G = 1700. The economists also estimate that the investment function is: I = 3300 - 100r, where r is the country’s real interest rate, expressed as a percentage (i.e. r = 1 means interest rate is one percent). Calculate private saving, public saving, national saving, investment, and the equilibrium real interest rate.
calculate the money growth rate required to finance the budget deficit of Rs. 10,000 in an economy. Given the following information:
Income(Y) = Rs. 100,000
Nominal money supply (M) = Rs. 80,000
Price level (P) = Rs. 20
Chapter 16 Solutions
Macroeconomics (Fourth Edition)
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