4. What effect does a temporary increase in government purchases-for example, to fight a war-have on desired consumption and desired national saving, for a constant level of output? Assume that Ricardian equivalence holds (Complete the table below) Increase in government purchases: Desired Consumption, C Desired National Savings (1) (12) What is the effect on desired consumption and desired national saving of a lump-sum tax increase? Assume that Ricardian equivalence holds (Complete the table below) (1) O Increase (1) (2) O Increase (1) O Decrease (1) O Decrease (4) O Unchanged O Unchanged Desired Consumption, C Desired National Saving, S (3) O Increase (1) Decrease (1) O Unchanged (4) O Increase (T) O Decrease (1) O Unchanged A lump-sum tax increase

4. What effect does a temporary increase in government purchases-for example, to fight a war-have on desired consumption and desired national saving, for a constant level of output? Assume that Ricardian equivalence holds (Complete the table below) Increase in government purchases: Desired Consumption, C Desired National Savings (1) (12) What is the effect on desired consumption and desired national saving of a lump-sum tax increase? Assume that Ricardian equivalence holds (Complete the table below) (1) O Increase (1) (2) O Increase (1) O Decrease (1) O Decrease (4) O Unchanged O Unchanged Desired Consumption, C Desired National Saving, S (3) O Increase (1) Decrease (1) O Unchanged (4) O Increase (T) O Decrease (1) O Unchanged A lump-sum tax increase

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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During the Bush administration, several factors contributed to an increase in government deficits, including a recession, a tax cut, and an increase in government spending. Move the supply curve, the demand curve, or both to describe the expected effect this increase in the deficit would have upon the market for savings. Real interest rate Supply X Savings and investment Demand According to this model, an increase in deficit spending will result in O a decrease in private investment as the cost of borrowing increases. O an increase in private investment as the cost of borrowing decreases. O a decrease in private investment as the cost of borrowing decreases. O an increase in private investment as the cost of borrowing increases.
4:51 PM Fri Mar 17 :3 21 := Unanswered 23 Unanswered TF Unanswered 21 Unanswered 2 attempts left Numeric answer 1 attempt left Type your response 2 attempts left ● 2 attempts left Suppose the initial change in spending is $12 billion. The indirect effects of that change cause a change in total spending of $24 billion. What is the mpc? 2 attempts left ● 22% Open Open Open Open × Submit ×
6 Suppose a closed economy with no government spending or taxing initially. Suppose also that intended investment is equal to 100 and the aggregate consumption function is given by C = 250 + 0.75Y. And suppose that, if at full employment, the economy would produce an output and income of 3500 By how much would the government need to raise spending (G) to bring the economy to full employment? (round your answer to the nearest whole value)
table below shows levels of employment, output, consumption, and saving for a private closed economy. Possible Levels of Employment, Millions Real Domestic Output,Billions Consumption,Billions Saving,Billions 40 $ 240 $ 244 -$ 4 45 260 260 0 50 280 276 4 55 300 292 8 60 320 308 12 65 340 324 16 70 360 340 20 75 380 356 24 80 400 372 28 Instructions: Enter your answers as a whole number. Using the consumption and saving data above and assuming planned investment is $16 billion, answer the following questions: a. What are saving and planned investment at the $380 billion level of domestic output? Investment = $ billion
Crowding out appears contradictory to Y-T-C + T-G = I (Assuming EX-IX =0) - if interest rates increase, then assuming the tax cut is permanent a consumer's disposable income increases but due to interest rates increasing it may discourage consumption in period 1 - so I am confused as to what the effect on private saving will be - if private saving is Y-T-C - and T has reduced - what will happen to C if disposable income rises but interest rates also rise?
Effects of a government budget deficit Consider a hypothetical open economy. The following table presents data on the relationship between various real interest rates and national saving, domestic investment, and net capital outflow in this economy, where the currency is the U.S. dollar. Assume that the economy is currently experiencing a balanced government budget. Real Interest Rate National Saving Domestic Investment Net Capital Outflow (Percent) (Billions of dollars) (Billions of dollars) (Billions of dollars) 7 55 25 -10 6 50 35 -5 5 45 45 0 4 40 55 5 3 35 65 10 2 30 75 15 Given the information in the preceding table, use the blue points (circle symbol) to plot the demand for loanable funds. Next, use the orange points (square symbol) to plot the supply of loanable funds. Finally, use the black point (cross symbol) to indicate the equilibrium in this market.
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