Macroeconomics
13th Edition
ISBN: 9780134735696
Author: PARKIN, Michael
Publisher: Pearson,
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Question
Chapter 24, Problem 9SPA
To determine
Identify the real interest rate, investment, and crowding out.
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Students have asked these similar questions
15. The change in the Personal current taxes from 4th quarter of 2017 to the 4th quarter of 2019 is: ______ billions.
16. he change in the Net federal government saving (budget deficit), from 4th quarter of 2017 to the 4th quarter of 2019 is: ______ billions.
In a closed economy, the gross domestic product is
$45,000, consumption is $17,300 and taxes are
$8,200. If the national saving is 9,000, then this
government will be running:
Select one:
a. A budget surplus of $10,500
b. None of the answers are correct
c. A budget deficit of $10,500
d. A budget surplus of $18,700
e. A budget deficit of $18,700
Suppose the government borrows $20 billion more next year than this year,a. Use a supply-and-demand diagram to analyze this policy. Does the interest rate rise or fall?b. What happens to investment? To private saving? To public saving? To national saving? Compare the size of the changes to the $20 billion of extra government borrowing.c. How does the elasticity of supply of loanable funds affect the size of these changes?d. How does the elasticity of demand for loanable funds affect the size of these changes?e. Suppose households believe that greater government borrowing today implies higher taxes to pay off the government debt in the future. What does this belief do to private saving and the supply of loanable funds today? Does it increase or decrease the effects you discussed in parts (a) and (b)?
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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Similar questions
- What must take place for the government to run deficits without any crowding out?arrow_forwardBased on the national saving and investment identity, what are the three ways the macroeconomy might react to greater government budget deficits?arrow_forwardSketch a diagram of how sustained budget deficits cause low economic growth.arrow_forward
- Public saving is positive when: a. there is a government budget deficit b. after-tax income of households and businesses is greater than consumption expenditures c.there is a government budget surplus d. the government's budget is balancedarrow_forwardWhat is a government budget deficit? How doesit affect interest rates, investment, and economicgrowth?arrow_forward4. What is a government budget deficit? How does it affect interest rate, investment, and economic growth 5. Draw a graph when government run a change in the tax that might increase private saving. How would it affect the market for loanable funds?arrow_forward
- • Analyze the effects of a government budget deficit. • Examine how the interest rate is determined in a variety of scenarios. • Synthesize knowledge of saving, investment, and the financial system. Government budget and national saving: 1. Suppose that GDP equals $10 trillion, consumption equals $6.5 trillion, and the government spends $2 trillion and has a budget deficit of $300 billion. Please find public saving, taxes, private saving, national saving, and investment.arrow_forwardThe table sets out the data for an economy when the government's budget is balanced. Real Loanable funds Loanable funds interest rate If the government's budget becomes a deficit of $1.0 billion, what are the real demanded supplied (percent per year) interest rate and investment? (billions of 2007 dollars) 4 7.5 4.5 Does crowding out occur? 7.0 5.0 6.5 5.5 ..... If the government's budget becomes a deficit of $1.0 billion, the real interest rate is 7 6.0 6.0 percent a year and the quantity of investment is $ >>> Answer to 1 decimal place. billion. 8 5.5 6.5 9. 5.0 7.0 10 4.5 7.5arrow_forwardUsing a graph representing the market for loanable funds, show and explain what happens tointerest rates and investment if a government goes from a deficit to a surplus.arrow_forward
- DONOT ANSWER QUESTION 1 ONLY 2, • Analyze the effects of a government budget deficit. • Examine how the interest rate is determined in a variety of scenarios. • Synthesize knowledge of saving, investment, and the financial system. Government budget and national saving: 1. Suppose that GDP equals $10 trillion, consumption equals $6.5 trillion, and the government spends $2 trillion and has a budget deficit of $300 billion. Please find public saving, taxes, private saving, national saving, an investment. The model of loanable funds: 2. Please use the loanable funds model to analyze the effects of a government budget deficit (you can attach a copy of your graph showing your work): A. Draw the diagram showing the initial equilibrium. B. Determine which curve shifts when the government runs a budget deficit. C. Draw the new curve on your diagram. D. What happens to the equilibrium values of the interest rate and investment?arrow_forward8. Suppose the government borrows $20 billion more next year than this year. a. Use a supply-and-demand diagram to analyze this policy. Does the interest rate rise or fall? b. What happens to investment? To private saving? To public saving? To national saving? Compare the size of the changes to the $20 billion of extra government borrowing.arrow_forwardSuppose there is an increase in budget deficit, what happens to intrest rates and national savings ?arrow_forward
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