39 Are the following statements true or not true?1. Because of the crowding out effect in the circular flow model of a closed economy, a fiscal expansionleads to a higher real interest rate, and therefore less private investment and a lower level ofaggregate production.2. In the circular flow model of a closed economy, excess demand in the market for loanable funds leadsto a higher real interest rate, such that the supply of loanable funds increases and the demand forloanable funds decreases, until the loanable funds market is again in equilibrium.Statement I is true; statement II is true.O Statement I is true; statement Il is not true.Statement I is not true; statement II is true.Statement I is not true; statement II is not true. 38The table below shows the composition of GDP in the U.S. in 2016 according to the income approach andthe expenditure approach. VWe also know that labour income in the U.S. in 2016 was 60% of GDP. Are thefollowing statements about the U.S. in 2016 then true or not true?1. Compensation of employees in 2016 was 60% of GDP and operating surplus and mixed income in2016 was 33.3% of GDP (Le. z - 60 and az = 33.3).2. As private consumption was higher than labour income in 2016, private saving was negative in 2016.The composition of GDP (in percent, 2016)Income approach:• taxes less subsidies on production and imports: 6.7• compensation of employees:• operating surplus and mixed income:Expenditure approach:• private consumption:• gross capital formation:• government consumption:• net exports:68.520.414.3-2.8Source: OECDStatement I is true; statement II is true.Statement I is true: statement Il is not true.Income approach:• taxes less subsidies on production and imports: 6.7• compensation of employees:• operating surplus and mixed income:Expenditure approach:• private consumption:• gross capital formation:• government consumption:• net exports:68.520.414.3-2.8Source OECDStatement I is true; statement II is true.Statement I is true; statement II is not true.Statement I is not true; statement II is true.Statement I is not true; statement II is not true.

Option A - both statements are true Fiscal expansion shifts IS curve to the right which increases…

Answered: 39 Are the following statements true or…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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] In the loanable funds market model, assuming everything else is constant, which curve (supply of funds or demand for funds) is affected if there is an increase in national saving? How will equilibrium real interest rate and equilibrium quantity of loans change?
1. I would like for you to identify and explain how a government budget surplus impacts the loanable fund market by explaining which curve(s) moves and which direction. 2. Identify of being a closed economy or an open economy affects the market differently.
1) The government's budget deficit increases, and at the same time the trade deficit grows. This will lead to a(n) _____ in the demand and a(n) _____ in the supply of loanable funds in domestic markets. increase; increase decrease; increase decrease; decrease 2) A temporary decrease in government purchases would cause: a rightward shift in the saving curve and a leftward shift in the investment curve. a rightward shift in the saving curve and a rightward shift in the investment curve. no shift in the saving curve, but a leftward shift in the investment curve.
The current market rate of interest is 10 percent. At that rate of interest, businesses borrow $300 billion per year for investment and consumers borrow $50 billion per year to finance purchases. The government is currently borrowing $150 billion per year to cover its budget deficit. a. Derive the market demand for loanable funds, and show how investors and consumerswill be affected if the budget deficit increases to $250 billion per year. Draw a graphto show your conclusion. b. Assuming taxpayers do not anticipate an increase in the future market rate of interestdue to the increase in budget deficit, show the impact of the increase in the budget deficit on the market for loanable funds. c. How would your conclusion differ if taxpayers fully anticipate future tax increases to offset the increase in the budget deficit? d. Do you think the Ricardian Equivalence is realistic?
Suppose the government ran a budget surplus in 2018 and a larger surplus in 2019. The loanable funds model would predict that, as a result of the increase in the surplus, A. both the government debt and interest rates increased between 2018 and 2019. B. the government debt decreased and interest rates increased between 2018 and 2019. both the government debt and interest rates decreased between 2018 and 2019. C. D. the government debt increased and interest rates decreased between 2018 and 2019.
Suppose government provides tax rebate to small business on their business-related expenditure. Assuming no change in government budgetary position, this policy is likely to have a positive effect on household (or private) saving in the economy (Hint: think about the effect of this policy in Loanable Funds Market) Is this statement true, false or uncertain? Please provide your explaination.
please answer in text form and in proper format answer with must explanation , calculation for each part and steps clearly
For a closed economy, GDP is $18 trillion, consumption is $13 trillion, taxes are $2 trillion and the government runs a deficit of $1 trillion. What are private saving and national saving?
4
The current market rate of interest is 10 percent. At that rate of interest, businesses borrow $300 billion per year for investment and consumers borrow $50 billion per year to finance purchases. The government is currently borrowing $150 billion per year to cover its budget deficit. a. Derive the market demand for loanable funds, and show how investors and consumers will be affected if the budget deficit increases to $250 billion per year. b. Assuming taxpayers do not anticipate an increase in the future market rate of interest due to the increase in budget deficit, show the impact of the increase in the budget deficit on the market for loanable funds. c. How would your conclusion differ if taxpayers fully anticipate future tax increases to offset the increase in the budget deficit? d. Do you think the Ricardian Equivalence is realistic?
PLEASE ANSWER ALL QUESTIONS NOT JUST SOME PLEASE WRITE THE EXACT NUMBERS FOR THE GRAPH. PLEASE READ CAREFULLY, THIS MAY BE A SIMILAR QUESTION, BUT ALL QUESTIONS ARE DIFFERENT
Figure 26-3. The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves. B o A F S₁ D2 D1 Refer to Figure 26-3. Which of the following movements shows the effects of the government going from a budget deficit to a budget surplus? OA. a movement from Point A to Point B OB. a movement from Point B to Point A OC. a movement from Point A to Point F OD. a movement from Point C to Point B

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