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
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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
Transcribed Image Text: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
(1)-
Desired National Saving, s
(2)-
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).
A lump-sum tax increase:
Desired Consumption, C
(3)
Desired National Saving,
(4) O Increase (1)
O Decrease (↓)
O Unchanged
(4)
(1) O Increase (1)
O Decrease (4)
(2) O Increase (1)
O Decrease (↓)
O Unchanged
O Unchanged
(3) O Increase (1)
O Decrease (1)
O Unchanged
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