Macroeconomics
13th Edition
ISBN: 9780134735696
Author: PARKIN, Michael
Publisher: Pearson,
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Question
Chapter 24, Problem 8SPA
(a)
To determine
Identify the equilibrium real interest rate, investment, and private saving.
(b)
To determine
Identify the change in the real interest rate due to the changes in the planned savings.
(c)
To determine
Identify the change in the real interest rate due to the change in the planned savings.
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The table sets out the data for an economy when the government's budget is balanced.
Calculate the equilibrium real interest rate, investment, and private saving.
If planned saving increases by $0.5 trillion at each real interest rate, explain the change in the real interest
rate.
If planned investment increases by $1 trillion at each real interest rate, explain the change in saving and
the real interest rate.
The real interest rate is
>>> Answer to 1 decimal place.
percent a year.
C
Real
interest rate
(percent
per year)
4
56885
7
9
10
Loanable funds Loanable funds
supplied
(trillions of 2009 dollars)
demanded
7.0
6.5
6.0
5.5
5.0
4.5
4.0
5.0
5.5
6.0
6.5
7.0
7.5
8.0
How does a decrease in interest rates typically affect consumer spending and investment? A. Consumer spending decreases, investment increases B. Consumer spending increases, investment decreases C. Both consumer spending and investment increase D. Both consumer spending and investment decrease
The catch-up effect refers to the idea that
Select one:
a. If investment spending is low, increased saving will help investment to catch-up
b. None of the answers are correct
c. Saving will always catch-up with investment spending
d. It is easier for a country to grow fast if it starts out relatively poor
e. Rich countries aid relatively poor countries so as to catch them up
Chapter 24 Solutions
Macroeconomics
Ch. 24.1 - Prob. 1RQCh. 24.1 - Prob. 2RQCh. 24.1 - Prob. 3RQCh. 24.1 - Prob. 4RQCh. 24.2 - Prob. 1RQCh. 24.2 - Prob. 2RQCh. 24.2 - Prob. 3RQCh. 24.2 - Prob. 4RQCh. 24.2 - Prob. 5RQCh. 24.3 - Prob. 1RQ
Ch. 24.3 - Prob. 2RQCh. 24.3 - Prob. 3RQCh. 24.3 - Prob. 4RQCh. 24.3 - Prob. 5RQCh. 24.3 - Prob. 6RQCh. 24.4 - Prob. 1RQCh. 24.4 - Prob. 2RQCh. 24.4 - Prob. 3RQCh. 24 - Prob. 1SPACh. 24 - Prob. 2SPACh. 24 - Prob. 3SPACh. 24 - Prob. 4SPACh. 24 - Prob. 5SPACh. 24 - Prob. 6SPACh. 24 - Prob. 7SPACh. 24 - Prob. 8SPACh. 24 - Prob. 9SPACh. 24 - Prob. 10SPACh. 24 - Prob. 11SPACh. 24 - Prob. 12SPACh. 24 - Prob. 13APACh. 24 - Prob. 14APACh. 24 - Prob. 15APACh. 24 - Prob. 16APACh. 24 - Prob. 17APACh. 24 - Prob. 18APACh. 24 - Prob. 19APACh. 24 - Prob. 20APACh. 24 - Prob. 21APACh. 24 - Prob. 22APACh. 24 - Prob. 23APACh. 24 - Prob. 24APACh. 24 - Prob. 25APACh. 24 - Prob. 26APACh. 24 - Prob. 27APACh. 24 - Prob. 28APACh. 24 - Prob. 29APACh. 24 - Prob. 30APA
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- Question 7 Use the market for saving and investment to show the effect of the following: Firms are forced to close down due to the coronavirus outbreak. Real interest rate (percent per year) 10 8 6 4 2 The savings function [Select] The investment function [Select] The real interest rate [Select] 1.2 SLF The level of savings and investment [Select] DLF 1.4 1.6 1.8 2.0 2.2 Loanable funds (trillions of 2009 dollars)arrow_forwardScenario 3: Initially, the government's budget is balanced; then the government significantly increases spending on national defense without changing taxes. This change in spending causes the government to run a budget which national saving. Shift the appropriate curve on the graph to reflect this change. This causes the interest rate to the level of investment spending.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_forward
- 3. In cases below, answer questions below. 3.a. People’s preference for saving increased (so people would save more.) Which curve (demand or supply) would shift to which direction (left or right)? How would investment change: Decrease or Increase? Curve: Direction: Change in investment: 3.b. Prospect for profit from investments increased. How would the equilibrium quantity of loanable fund change: Decrease or Increase? How would the equilibrium interest rate change: Decrease or Increase? How would the saving would change: Decrease or Increase? Quantity: Interest rate: Change in savingarrow_forwardShow on a graph of the market for saving and investment the effect of the following. (The graph is a basic savings and investment graph). In an effort to improve fiscal conditions, policymakers raise taxes. This results in lower disposable income. Real interest rate (percent per year) 10. 8 6 4 2 SLF 0 1.2 1.4 1.6 DLF 2.0 2.2 1.8 Loanable funds (trillions of 2009 dollars) The savings function [Select] The investment function [Select] The real interest rate [Select] The level of savings and investment [Select]arrow_forwardMost entrepreneurs do not have enough money of their own to start their businesses. When they acquire the necessary funds from someone else, Select one: a. Their saving is being financed by someone else’s investment. b. Their investments are being financed by someone else’s saving. c.Their consumption expenditures are being financed by someone else’s saving. d.Their consumption expenditures are being financed by someone else’s investment.arrow_forward
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