Exercise 2 Using the Key Account Identity and assume the numbers you select has been representative for many years: a) How can you tell whether a country is a net lender or a net borrower? b) If public sector is a net borrower. Explain by using your own numbers (% of GDP) the different between whether the debt is internal or external. c) Present an example using your own numbers (% of GDP) a situation where private sector is a net lender while public sector is a net borrower. Explain what each number tell us about the players in each sector. d) Assume the numbers your chose in part c) is representative for many years. What can you tell about the situation in the country as a hole? Using the real exchange rate: e) The competitiveness of the manufacturing industry can be measured by using the real exchange rate. Present an example using words and your own numbers where the competitiveness increase. f) Use numbers from part e) in the purchasing power parity (PPP) and explain the conclusion you get from the theory.

Exercise 2 Using the Key Account Identity and assume the numbers you select has been representative for many years: a) How can you tell whether a country is a net lender or a net borrower? b) If public sector is a net borrower. Explain by using your own numbers (% of GDP) the different between whether the debt is internal or external. c) Present an example using your own numbers (% of GDP) a situation where private sector is a net lender while public sector is a net borrower. Explain what each number tell us about the players in each sector. d) Assume the numbers your chose in part c) is representative for many years. What can you tell about the situation in the country as a hole? Using the real exchange rate: e) The competitiveness of the manufacturing industry can be measured by using the real exchange rate. Present an example using words and your own numbers where the competitiveness increase. f) Use numbers from part e) in the purchasing power parity (PPP) and explain the conclusion you get from the theory.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

The current market rate of interest is 10 percent. At that rate of interest, businesses borrow $300 billion per year for investment and consumers borrow $50 billion per year to finance purchases. The government is currently borrowing $150 billion per year to cover its budget deficit. a. Derive the market demand for loanable funds, and show how investors and consumerswill be affected if the budget deficit increases to $250 billion per year. Draw a graphto show your conclusion. b. Assuming taxpayers do not anticipate an increase in the future market rate of interestdue to the increase in budget deficit, show the impact of the increase in the budget deficit on the market for loanable funds. c. How would your conclusion differ if taxpayers fully anticipate future tax increases to offset the increase in the budget deficit? d. Do you think the Ricardian Equivalence is realistic?
Suppose the government ran a budget surplus in 2018 and a larger surplus in 2019. The loanable funds model would predict that, as a result of the increase in the surplus, A. both the government debt and interest rates increased between 2018 and 2019. B. the government debt decreased and interest rates increased between 2018 and 2019. both the government debt and interest rates decreased between 2018 and 2019. C. D. the government debt increased and interest rates decreased between 2018 and 2019.
please answer in text form and in proper format answer with must explanation , calculation for each part and steps clearly
The U.S. government funds deficit spending by: A. selling government services. B. decreasing taxes. C. redeeming bonds. D. issuing bonds E.increasing taxes
The current market rate of interest is 10 percent. At that rate of interest, businesses borrow $300 billion per year for investment and consumers borrow $50 billion per year to finance purchases. The government is currently borrowing $150 billion per year to cover its budget deficit. a. Derive the market demand for loanable funds, and show how investors and consumers will be affected if the budget deficit increases to $250 billion per year. b. Assuming taxpayers do not anticipate an increase in the future market rate of interest due to the increase in budget deficit, show the impact of the increase in the budget deficit on the market for loanable funds. c. How would your conclusion differ if taxpayers fully anticipate future tax increases to offset the increase in the budget deficit? d. Do you think the Ricardian Equivalence is realistic?
During the financial crisis it was proposed that firms be provided with a tax credit for investment projects. Such a tax credit would shift: a. the demand for loanable funds left and shift the supply of dollars in the market for foreign-currency exchange right. b. both the demand for loanable funds and the supply of dollars in the market for foreign-currency exchange right. c. both the demand for loanable funds and the supply of dollars in the market for foreign-currency exchange left. d. the demand for loanable funds right and shift the supply of dollars in the market for foreign-currency exchange left.
1. During the late 1980s and early 1990s, most of the budget deficits were accounted for by a. the decline of foreign investment in the United States. b. the downturn in the economy. c. deliberate fiscal policy changes. d. All of the above are correct. 2.Debt is to deficit as a. money is to income. b. rent is to dividend. c. flow is to stock. d. property is to wealth. 3. A chart of the ratio of national debt to GDP from 1915 to 2014 would show a. significant decreases from 2003 to 2010. b. significant increases from 1983 to 1994. c. sharp increases from 1945 to 1975. d. a continuous decline. 4. A chart of the ratio of national debt to GDP from 1915 to 2014 would show a. significant increases during World Wars I and II. b. significant increases from 1945 to 1975. c. significant increases from 1995 to 2003. d. a larger value in 1975 compared to 1945. 5. In 2009, the…
1) Using a graph representing the market for loanable funds, show and explain what happens to interest rates and investment if: a reduction in military spending moves the government’s budget from deficit into surplus. Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.
Answer the questions below for the economy of Motak using the graph below. The Economy of Motak Government spending / net taxes 400 350 300 250 200 150 100 50 200 400 600 800 1000 1200 1400 1600 Real GDP NTR G1 Tools a. If GDP is $800 and government spending is G₁, the size of Motak's budget deficit is $ b. If government spending is decreased by the size of the deficit in part (a), draw the new curve labelled G₂ in the graphing area above. c. Suppose the multiplier has a value of 2, the new level of equilibrium GDP is $ d. Motak's deficit at this new level of equilibrium GDP is $ billion. billion. billion.
From the 1960s to 2020, transfer payments A. have declined by half as a percentage of total federal government expenditures. B. have grown very slowly as a percentage of total federal government expenditures. C. remained the same percentage of total federal government expenditures. D. have risen from 25 percent to just over 50 percent percent of federal government expenditures.
In view of the large adverse impact of COVID-19 on the world economy, many governments have implemented expansionary fiscal policy. Together with a decrease in tax revenues, the governments have sufferedlarge deficits. How does a government deficit affect the interest rate, the quantity of loanable funds and economic growth? Explain your answers with a diagram
Collaboration with Congress during the Clinton administration allowed for an aggressive deficit‑cutting plan to pass. At the end of the 1990s, Congress eliminated the government deficit. Manipulate the graph to illustrate how the elimination of the deficit affects the loanable funds market. Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.