e. Electric power providers become more confident inthe ability for wind farms to meet electricity demand.This leads to a boom in building and producing windfarms across the country.IS-MP graphReal interest rate (%)Output gap (%)IS curveMP curve

Electric power providers become more confident in the ability for wind farms to meet electricity…

Answered: e. Electric power providers become more…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Similar questions

Suppose the Biden administration permanently increases government purchases. (You shouldassume that the economy is at Y* before the increase.)a. What will be the impact on the economy’s normal real interest rate (r*) and normalinvestment (I*)? Explain with the help the long-run savings and investment diagram
Suppose the nominal rate of interest on a savings account is 15%, the real rate of interest is 3%, and the tax rate on nominal interest is 20%. Which of the following is true? A saver would lose 9% real interest. A saver would neither gain nor lose real interest. A saver would earn 12% real interest. A saver would earn 2.4% real interest.
The table below depicts the level of gross investment at various interest rates in the economy. Real Interest Rate Year 1. Gross Investment Demand Year 2 Gross Investment Demand 7% 6 5 4 3 $25,000 50,000 75,000 100,000 125,000 $15,000 30,000 45,000 60,000 75,000 Instructions: Enter your answers as a whole number. a. In year 1, if the real interest rate is 5%, what will gross investment be in the economy? b. In year 2, a recession reduces investment demand. If the real interest rate remains at 5%, what will gross investment be in the economy? $ c. Suppose the government enacts expansionary fiscal policy and funds this action through borrowing. Real interest rates increase to 7% as a result of this action. What will the new level of gross investment be in year 2? $ d. The change in gross investment due to increased government borrowing is known as O crowding out. O an economic contraction. O investment loss.
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Looking at business fixed investment, explain why investment is negatively related to the interest rates.
NEW QUESTION Consider the investment function of the IS model. Suppose that in the long-run 20% of GDP is spent on investment. Moreover, a one percentage-point increase of the real interest rate reduces the share of investment in GDP by one percentage point. Suppose that at some time t the real interest rate is equal to -1% while the rate of return of physical capital (think of it as the marginal product of capital) is 3%. What is the share of investment in GDP at time t?
The graph below represents the market for loanable funds for an economy. Use the graph to answer the following questions. real interest rate 6% 51000 Loanable fund $ Assume there currently is a surplus in the market for loanable funds. The current real interest rate is I Select) the equilibrium real interest rate. As the market moves to the equilibrium real interest rate we expect I Select ] Demand for loanable funds comes from the activities of ISelect) 13
Macmillan Learning U The graph depicts the market for loanable funds. Shift the appropriate curves to indicate what will happen to the market if there is an improvement in the technology firms use in production. As a result of this change, the real interest rate is now % Real interest rate 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 and the quantity of funds is $ billion. 0.5 Supply Demand 0.0 0 5 10 15 20 25 30 35 40 45 50 Loanable funds (in billions)
K Consider the graph to answer the following questions: a. The shift from S, to S₂ represents in the supply of loanable funds. b. With the shift in supply, the equilibrium quantity of loanable funds c. With the change in the equilibrium quantity of loanable funds, the quantity of saving and the quantity of investment ▼ A CI Real Interest Rate Market for Loanable Funds L₂ L1 Loanable Funds ($ per year) S₁ Q
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Step 2 Determine the equilibrium real interest rate. The table below is broken down by Month, Real Interest Rate (%), Loanable Funds (trillions of $), Exogenous Change, Equilibria (increases, decreases, or no change. Use the data table to determine the equilibrium real interest rate after certain factors change: Equilibria (increases, decreases, or no change) Month Real Interest Loanable Funds Exogenous Rate (%) (trillions of $) Change 3 no change no change January 3% April 3% 4 increased fund ? supply decreased fund July 4% supply December 3% 3 increased fund ? demand
Suppose the government must increase taxes in order to increase spending. Now assume Congress wants to increase spending on education without decreasing spending somewhere else. For each variable state if it will INCREASE, DECREASE or REMAIN UNCHANGED. In at least one complete sentence state WHY this change will occur. Be specific. Private Saving (Sp): Consumption: (C) Government Saving (Sg) Total Saving: (S) Real Interest Rates: (r) Investment: (I)

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e. Electric power providers become more confident in the ability for wind farms to meet electricity demand. This leads to a boom in building and producing wind farms across the country. IS-MP graph Real interest rate (%) Output gap (%) IS curve MP curve