In a hypothetical economy, no Investment projects are undertaken when the real Interest rate is 12 percent or above, 40 projects worth $1 million each are undertaken when the real interest rate is 10 percent, and 40 more projects worth $1 million each are undertaken every time the real interest rate falls by 2 percent until it reaches a value of zero. a. Draw a graph showing the Investment demand curve. Plot 7 points in total using the line tool (investment demand curve) given below. Real Rate of Return and Interest (%) 14 12 10 4 N Investment Demand Curve 40 80 120 160 200 240 280 Investment (2017 $ million) Tools investment de

In a hypothetical economy, no Investment projects are undertaken when the real Interest rate is 12 percent or above, 40 projects worth $1 million each are undertaken when the real interest rate is 10 percent, and 40 more projects worth $1 million each are undertaken every time the real interest rate falls by 2 percent until it reaches a value of zero. a. Draw a graph showing the Investment demand curve. Plot 7 points in total using the line tool (investment demand curve) given below. Real Rate of Return and Interest (%) 14 12 10 4 N Investment Demand Curve 40 80 120 160 200 240 280 Investment (2017 $ million) Tools investment de

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter9: Aggregate Demand

Section: Chapter Questions

Problem 1.1P

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Question 4 Explain how does a decrease in the current income y affect the consumer's consumption-saving decision. In particular, explain: 1) How will current consumption c, future consumption c', and savings s change; 2) Are there any substitution effect or income effect. Make sure you draw two figures, one for the borrowers and one for the lenders.
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1. a. Explain consumption and saving function by using numerical example and diagram.
Explain how does adecrease in the current income y affect the consumer’s consumption-saving decision. In particular,explain: 1) How will current consumption c, future consumption c', and savings s change; 2) Arethere any substitution effect or income effect. Make sure you draw two figures, one for the borrowersand one for the lenders.
In a hypothetical economy, no investment projects are undertaken when the real interest rate is 12 percent or above, 40 projects worth $1 million each are undertaken when the real interest rate is 10 percent, and 40 more projects worth $1 million each are undertaken every time the real interest rate falls by 2 percent until it reaches a value of zero. a. Draw a graph showing the investment demand curve. Plot 7 points in total using the line tool (investment demand curve) given below. Investment Demand Curve 14 Tools 12 investment de 10 8. 6. 4. 40 80 120 160 200 240 280 Investment (2017 $ million) b. If the real interest rate is 6% then $ million of investment will take place in this economy. c. If the real interest rate rises to 4% then investment (Click to select) V to $ million. Real Rate of Return and Interest (%)
Suppose that Yvette receives a pay raise of $1,200 per year. She can either use the extra money to consume goods and services, or she can save it by depositing it in a bank For each of the alternative annual interest rates in the following table, indicate how much interest Yvette would eam per year on her annual raise if she saves it. (Note: Assume that no income taxes are deducted.) Interest Rate Interest Earned (Dollars) (Percent) (Dollars) 20 A higher interest rate gives Yvette, incentive to save.
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