At any given interest rate, many major businesses become pessimistic about the future profitability of investment spending. Assuming there are no external controls on interest rates, what will be the likely results on quantity of money saved, on interest rates, and on additional business investment? Assume no change in government borrowing.

At any given interest rate, many major businesses become pessimistic about the future profitability of investment spending. Assuming there are no external controls on interest rates, what will be the likely results on quantity of money saved, on interest rates, and on additional business investment? Assume no change in government borrowing.

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter30: Market Failure: Externalities, Public Goods, And Asymmetric Information

Section: Chapter Questions

Problem 1QP

See similar textbooks

Similar questions

Categorize each flow in the following table as either an injection into the circular flow or a leakage from the circular flow.
Decisions for Tomorrow The following section provides estimates of time spent in traffic delays. Stagnant Infrastructure Investment Over the last several decades the United States has allocated about 2.5 percent of GDP to public infrastructure. About a fourth of this investment comes from the federal government and the remainder from state and local governments. In 2019 total spending was about $450 billion, just 2.3 percent of GDP. At that rate of investment, the United States has barely been able to maintain existing infrastructure, much less expand it. The American Society of Civil Engineers says that 4,095 of the nation's 85,000 dams are in need of repair. They estimated that the nation's infrastructure everything from highways to sewers-needs a $3.6 trillion upgrade. The Cost of Delay The U.S. Department of Transportation estimates that people now spend nearly 3.5 billion hours a year in traffic delays. If the nation's highways don't improve, those delays will skyrocket to more…
If the government expenditures decrease by 100 million Euro and the aggregate demand decreases by 400, then the marginal propensity to consume is:
Which of the following policies can the government implement to stimulate investment? Group of answer choices Reduce taxes on interest income or capital gains Accelerate businesses' depreciation allowances Reduce budget deficits All of these are correct
Suppose that the government grants investment tax credits without changing the overall tax revenue T. In this case, the investment demand function will shift _____, but in equilibrium, the quantity demanded of I will _____ because r will increase.
Pundits have stated that the recent tax cut mainly benefits companies. The benefit to companies can also spillover to consumers in several ways. Which of the following actions as a result of the tax cut will benefit consumers? tax cut results in more investment expenditures by firms tax cuts raise stock market values tax cuts result in an increase in the capital stock all of the above
How has Covid-19 (the corona virus) affected or will affect one specific aspect of the Canadian, Quebec, or Montreal economy?
Level of investment goes up by 200. What happens with the level of GDP if you know that MPC = 0,8 and net tax %3D rate = 0.1?
Fiscal policy can affect the rental cost of capital. true or false?
(a) Suppose in a simple Keynesian economy, planned consumption function is given by C=250+0.65(Y-T). Planned investment, government purchases, taxes are $100 million, $100 million and $150 million respectively. What is MPC, MPS and autonomous consumption Derive the saving function. What is the equilibrium level of income? Y= AD=C+I+G If government purchases increase to $150 million, what is the new equilibrium level of income? What level of government purchases is needed to achieve an income of $2000 million? From question e) you get the newly government purchase. Now find out the multiplier value What is the amount of shift in AD curve? [Use the multiplier value from e)] (b) In a self-regulating economy “X”, labor supply is 40 million but labor demand is 10 million. What will happen in goods and service market simultaneously? Explain this situation with relevant graph. Based on your findings in a) is it denoting long run equilibrium? If not, will the economy be able to restore…
k
C = 250 + 0.75Yd G = 150 T = 200 I = 80 find the equilibrium level of income and private saving