Macroeconomics (7th Edition)
7th Edition
ISBN: 9780134738314
Author: R. Glenn Hubbard, Anthony Patrick O'Brien
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
Chapter 18, Problem 18.3.10PA
To determine
The effect on the domestic investment spending.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Q-3:
B.
The following graph shows a relationship between saving (S), investment (I) and world interest rate (r*); given that r*> r, where r is domestic interest rate.
Graphically show and interpret the impacts of following policy measures on saving (S), investment (I), and net exports (NX):a) Change in fiscal policy at homeb) Change in fiscal policy abroadc) An increase in investment demand
During the year, Japan had a current-account surplus of 98 billion.
What is the gap between Japan’s national expenditure and its national income? Explain.
What is the gap between Japan’s savings and its domestic investment? Explain.
Suppose the Japanese government’s budget ran a 22 billion surplus during the year. What can you conclude about Japan’s private savings-investment balance for the year? Explain.
QUESTION 9
As a result of entering the world economy, Neverland experiences economic boom and its GDP goes up to y= 13250: The functions that describe consumption and
investment are still the same: cd(r) = 5000 – 1000r+ 0.25Y and Id(r) = 500 – 1800r +0.2Y. The government wants to take advantage of growth and increases
its expenditures to: G- 1000: What is Neverland's current account balance?
Note: Type in your answer approximated to two decimal points, i.e., your answer must be of the form "999.99". I will not be able to fix correct answers that were entered
incorrectly, such as "999.999" or "999,99" or "999". In case the last digit in the correct answer is zero, e.g., "999.90" or "999.00", Blackboard will automatically delete it
and you should not do anything about it.
Chapter 18 Solutions
Macroeconomics (7th Edition)
Ch. 18 - Prob. 18.1.1RQCh. 18 - Prob. 18.1.2RQCh. 18 - Prob. 18.1.3RQCh. 18 - Prob. 18.1.4PACh. 18 - Prob. 18.1.5PACh. 18 - Prob. 18.1.6PACh. 18 - Prob. 18.1.7PACh. 18 - Prob. 18.1.8PACh. 18 - Prob. 18.1.9PACh. 18 - Prob. 18.1.10PA
Ch. 18 - Prob. 18.1.11PACh. 18 - Prob. 18.2.1RQCh. 18 - Prob. 18.2.2RQCh. 18 - Prob. 18.2.3RQCh. 18 - Prob. 18.2.4RQCh. 18 - Prob. 18.2.5PACh. 18 - Prob. 18.2.6PACh. 18 - Prob. 18.2.7PACh. 18 - Prob. 18.2.8PACh. 18 - Prob. 18.2.9PACh. 18 - Prob. 18.2.11PACh. 18 - Prob. 18.2.12PACh. 18 - Prob. 18.2.13PACh. 18 - Prob. 18.2.14PACh. 18 - Prob. 18.3.1RQCh. 18 - Prob. 18.3.2RQCh. 18 - Prob. 18.3.3RQCh. 18 - Prob. 18.3.4PACh. 18 - Prob. 18.3.5PACh. 18 - Prob. 18.3.6PACh. 18 - Prob. 18.3.7PACh. 18 - Prob. 18.3.9PACh. 18 - Prob. 18.3.10PACh. 18 - Prob. 18.4.2RQCh. 18 - Prob. 18.4.5PACh. 18 - Prob. 18.4.6PACh. 18 - Prob. 18.4.7PACh. 18 - Prob. 18.4.8PACh. 18 - Prob. 18.5.1RQCh. 18 - Prob. 18.5.2RQCh. 18 - Prob. 18.5.3RQCh. 18 - Prob. 18.5.4PACh. 18 - Prob. 18.5.5PACh. 18 - Prob. 18.5.6PACh. 18 - Prob. 18.5.7PACh. 18 - Prob. 18.1RDECh. 18 - Prob. 18.2RDECh. 18 - Prob. 18.3RDECh. 18 - Prob. 18.4RDECh. 18 - Prob. 18.5RDECh. 18 - Prob. 18.1CTE
Knowledge Booster
Similar questions
- If national income Y = 10,500, disposable income Yd = 8,500 , consumption is C = 8,000, transfer payments TR = 150 and the budget deficit is BD = 200, what is the level of private domestic investment, I ? (please insert the round number without the Euro symbol)arrow_forwardYou have the following annual figures for the New Zealand economy. Investment expenditure $42.5 billion Government savings -$1.7 billion Many politicians and commentators would like to see continued increases in investment and current account surpluses rather than deficits. If these events are to occur, what else must be happening in the economy? 1. The Government must raise the retirement age. 2. Government spending must fall 3. National savings (private and government) must rise 4. New Zealand must restrict foreign ownership of land and other assetsarrow_forwardAs a result of entering the world economy, Neverland experiences economic boom and its GDP goes up to y=13250: The functions that describe consumption and investment are still the same: Cd(,) = 5000 – 1000r+0.25Y and 1d (r) = 500 – 1800r +0.2Y. The government wants to take advantage of growth and increases its expenditures to: G- 190o. What is Neverland's current account balance? Note: Type in your answer approximated to two decimal points, i.e., your answer must be of the form "999.99". I will not be able to fix correct answers that were entered incorrectly, such as "999.999" or "999,99" or "999". In case the last digit in the correct answer is zero, e.g., "999.90" or "999.00", Blackboard will automatically delete it and you should not do anything about it.arrow_forward
- You have the following annual figures for the New Zealand economy. Investment expenditure $42.5 billion Government savings -$1.7 billion The current account balance is not zero. In fact the current account deficit is $6.0 billion. What is New Zealand's actual private sector savings figure? $____billion (use 1 d.p.).arrow_forwardExpansionary fiscal policy is a useful instrument which can be used to stimulate aggregate spending in an economy. In the case of an open economy, the use of this type of policy can have a significant impact on the trade balance. Discuss, with the aid of clearly labelled graphs, how such an expansionary policy decision will impact on the goods market and net exportsarrow_forwardHow could a greater budget deficit increase the trade deficit? What happens to the multiplier if there is an increase in the marginal propensity to consume? What would likely happen to the level of economic activity if the government took the necessary steps to reduce the deficit significantly in a relatively short period of time? When is the most appropriate time to reduce the deficit?arrow_forward
- In your macroeconomic lectures you are often told that exchange rates and interest rates are important for macroeconomic decision-making. How does an increase in Japan’s government budget deficit affect each of the following? The real interest rate in the short run in Japan. Explain. Private domestic investment in plant and equipment in Japan. Draw a correctly labeled graph of the foreign exchange market for the euro, and show the effect of the change in the real interest rate in Japan from part (a)(i) on each of the following. Supply of euros. Explain. Yen price of the euro To reverse the change in the yen price of the euro identified in part (b) (ii), should the European Central Bank buy or sell euros in the foreign exchang market? Explain.arrow_forwardIf national income Y = 10,000, disposable income Yd = 8,000 , consumption is C = 7,500, transfer payments TR = 100 and the budget deficit is BD = 150, what is the level of private domestic investment, I ? (please insert the round number without the Euro symbol)arrow_forwardWhat is the saving and investment equation? If national saving declines what will happen to domestic investment and net foreign investment?arrow_forward
- Consider an open economy with a current population of 0.55 million people, and where the potential GDP is $3.24 billion. Consumer expenditure is represented by the following equation: C = 60+ 0.75DI. Exports are constant at $500 million, and investors want to spend $400 million at every level of income. The government purchases are $300 million, imports are constant at $450 million, and taxes are $200 million. (Question 12 of 12) Now, consider that investors become optimistic about the country's future, and raise their investment to $565 million in the following period. At the same time, given the birth rate, mortality rate, and net migration, the economy experienced an increase of 20% in its population. As a result of these changes, is the average person worse off or better off? (complete the following sentence) With the ✓ in investment and the in the population, the average person is ✓ as their standard of livingarrow_forwardImagine that the U.S. economy finds itself in the following situation: a government budget deficit of $100 billion, total domestic savings of $1,500 billion, and total domestic physical capital investment of $1,600 billion. According to the national saving and investment identity, what will be the trade balance? What will be the trade balance if investment rises by $50 billion, while the budget deficit and national savings remain the same?arrow_forwardWhy could a current account deficit stimulate an economy? List at least two reasons and explain with an example for each.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
