Could you answer question b) which is to draw the graph? Consider an economy in the long run with real GDP equal to the level of potential output, Y*.a. Explain the slopes of the investment demand curve and the national saving curve.Why is the investment demand curve downward sloping? (Select all that apply.)O A.Because a rise in the real interest rate decreases the opportunity cost of investmentO B. Because an decrease in the interest rate leads households to reduce their current consumptionO c. Because an increase in the interest rate leads households to reduce their current consumptionO D.Because an decrease in the interest rate leads households to increase their current consumptionYE.Because a fall in the real interest rate decreases the opportunity cost of investmentY F.Because a rise in the real interest rate increases the opportunity cost of investmentO G. Because a fall in the real interest rate increases the opportunity cost of investmentO H. Because an increase in the interest rate leads households to increase their current consumptionWhy is the national saving curve upward sloping? (Select all that apply.)O A. Because a rise in the real interest rate decreases the opportunity cost of investmentE B. Because an increase in the interest rate leads households to increase their current consumption.O c. Because a fall in the real interest rate decreases the opportunity cost of investmentO D. Because a decrease in the interest rate leads households to increase their current consumption.VE.Because a decrease in the interest rate leads households to increase their current consumptionO F. Because a fall in the real interest rate increases the opportunity cost of investmentLG. Because an increase in the interest rate leads households to reduce their current consumptionO H. Because a rise in the real interest rate increases the opportunity cost of investmentb. The market for financial capital is shown in the graph. Suppose the government pursued a fiscal contraction byreducing the level of government purchases.Use the line drawing tool to draw a single line to show the effect of this change in fiscal policy. Properly label your line.Carefully follow the instructions above, and only draw the required objects.NSFinancial Capital ($)Real Interest Rate (i)

Government expenditure has an effect on national savings. Changes in government expenditure causes…

b. The market for financial capital is shown in the graph. Suppose the government pursued a fiscal contraction by reducing the level of government purchases. Use the line drawing tool to draw a single line to show the effect of this change in fiscal policy. Properly label your line. Carefully follow the instructions above, and only draw the required objects. NS Financial Capital ($) Real Interest Rate (i)

b. The market for financial capital is shown in the graph. Suppose the government pursued a fiscal contraction by reducing the level of government purchases. Use the line drawing tool to draw a single line to show the effect of this change in fiscal policy. Properly label your line. Carefully follow the instructions above, and only draw the required objects. NS Financial Capital ($) Real Interest Rate (i)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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