2. 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.

2. 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.

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter18: Savings,investment And The Financial System

Section: Chapter Questions

Problem 8PA

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Suppose the government borrows $50 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 $50 billion of extra government borrowing, C, see the attached picture.
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)?
Suppose Indian government borrows 50,000/- more next year than this year. Use a supply-and-demand diagram to analyze this policy. Does the interest rate rise or fall? What happens to investment? To private saving? To public saving? To national saving? Compare the size of the changes to the 50,000/- of extra government borrowing.
9 Suppose the government borrows $7 billion more next year than this year (for example, they move from a balanced budget to a $7 billion deficit or from a $10 billion deficit to a $17 billion deficit). a Use a supply-and-demand diagram to analyse this policy. What happens to the interest rate? b What happens to investment? To private saving? To public saving? To national saving? Compare the size of the equilibrium changes with the $7 billion of extra borrowing. Is it the same, less or more? Carefully explain why and distinguish the various movements in the diagram. C How do the elasticities of supply of and demand for loanable funds (i.e. the slopes of the curves) affect the size of these changes? (Hint: See chapter 2 to review the definition of elasticity.) d Suppose households believe that greater government saving today implies lower future taxes since there will be little government debt. What does this belief do to private saving and the supply of loanable funds today? Does it…
22. Assume the US is operating in a closed economy and GDP is $20 trillion, consumption is $8 trillion, government spending is $10 trillion, and there is a balanced budget. a. Write the equation for public saving. Solve for public saving in this economy. b. Solve for net taxes c. Write the equation for private saving. Solve for private saving in this economy.
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1. Country X has following data: C = 20 + 0.8Y4, I = 30, G = 40, Tx = 20, T, = 15, X = 60, M = 20 + 0.04Y, incoming year growth target is 600, All figures is billion. Please calculate: a. National income equilibrium! b. Consumption and saving equilibrium! c. Government income from tax! d. How much change in government consumption if they want to achieve growth target?
Suppose that in a closed economy, GDP is $15 trillion, Consumption is $6 trillion, Government Purchases are $5 trillion, and there is a $500 billion budget deficit. 6. What are taxes? 7. What is public saving? 8. What is private saving? 9. What is national saving? 10. What is investment? If then taxes are raised by $500 billion dollars, and the public pays for those taxes entirely by reducing their consumption (no change to their savings), after this tax increase, 11. What is consumption? 12. What are taxes? 13. What is public saving? 14. What is private saving? 15. What is national saving? 16. What is investment?
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A closed economy has income Y of 1200, consumption C of 800, government purchases G of 200, and taxes T of 150. Investment is determined by the equation I = 300 – 20r. a. Calculate national saving. National saving = 200 b. Calculate public saving. Public saving = -50 c. Calculate private saving. Private saving = 250 d. Calculate equilibrium interest rate. Equilibrium interest rate = e. If the government increases its purchases to 240, what is the new equilibrium interest rate? New equilibrium interest rate =
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22 hw d-f