Question 3. Suppose that an economy can be described by the following equations:Y=C+I+ G,Y=5,000, G= 1,000, T=1,000,C= 250 + 0.75(Y-T),I= 1,000 – 50r.a. In this economy, compute private saving, public saving, and national savingb. Find the equilibrium interest rate (measured in percentage points).c. Now suppose that G rises to 1,250. Compute private saving, public saving and nationalsaving.d. Find the new equilibrium interest rate.

Answered: Question 3. Suppose that an economy can…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Consider the expressions T-G and Y-T-C. Which of the following statements is correct? Each one of these is equal to national saving. Each one of these is equal to public saving. The first of these is private saving; the second one is public saving. The first of these is public saving; the second one is private saving.
? Scenario 1: Suppose savers either buy bonds or make deposits in savings accounts at banks. Initially, the interest income earned on bonds or deposits is taxed at a rate of 18%. Now suppose there is a decrease in the tax rate on interest income, from 18% to 14%. Shift the appropriate curve on the graph to reflect this change. This change in the tax treatment of saving causes the equilibrium interest rate in the market for loanable funds to fall spending to decrease and the level of investment Scenario 2: An investment tax credit effectively lowers the tax bill of any firm that purchases new capital within some relevant time period. Suppose the government implements a new investment tax credit. Shift the appropriate curve on the graph to reflect this change. The implementation of the new tax credit causes the interest rate to fall and the level of investment to fall Scenario 3: Initially, the government's budget is balanced; then the government significantly increases spending on…
Q2 2. The Daisy-land's economy is described as follows: Y=C+I+G; Y=10,000; G-2,000; T-3,000; C=2,000+0.5 (Y-T); I=3,000-150r. a. In this economy, compute private saving, public saving, and national saving. b. Find the equilibrium interest rate. c. Now suppose that G is increased by 1,000. Compute private saving, public saving, and national saving.
please answer part 3
Assistance with the following question: Consider an economy described by the following equations: Y=C + I +G Y=7,000 G=4000 T=2,000 C=150+0.75(Y-T) I=1,000-50r —————————————— a. In this economy, compute private saving, public saving and national saving. b. Calculate the equilibrium interest rate.
..
] In the loanable funds market model, assuming everything else is constant, which curve (supply of funds or demand for funds) is affected if there is an increase in national saving? How will equilibrium real interest rate and equilibrium quantity of loans change?
4. Assume that the economy is described by the following equations: Y=C+l+G, Y=8490, G-2719, T-2056, C-258+ 1/2(Y-T), I-400 + 40r. Private saving and the equilibrium interest rate are O Private saving: 2959; The interest rate: 47.4 O Private saving: 2296; The interest rate: 23.7 O Private saving: 2296; The interest rate: 47.4 O Private saving: 2959; The interest rate: 23.7
a. If national saving of a closed economy equals$100,000, net taxes equal$125,000,GDPdeflator is 175 and government expenditure equals$45,000, what is private saving?
Consider the market for loanable fund. Suppose that government started to give tax incentives for investment (so the cost of investment fell.) Answer which curve (Demand or Supply) would shift to which direction (Left or Right), and answer how the equilibrium saving would change (Decrease or Increase)Curve: Direction: Saving:
3. The meaning of saving and investment Classify each of the following scenarios listed in the table below using the macroeconomic definitions of saving and investment. Maria buys a new crane for her construction firm. Simone purchases shares of stock in Warm Breeze, a cloud computing company. Rajiv takes out a loan and uses it to build a new cabin in Idaho. Kevin purchases a corporate bond issued by an automotive firm. Saving O Investment
a. Assume that the government borrows $4 billion to pay for its increased purchases. Adjust the graph below to reflect this change. Be sure to indicate the new market equilibrium. Interest Rate (percent) 10 9 8 7 2 1 0 Incorrect 0 Market for Loanable Funds E National saving, S(r) 6 2 4 8 10 12 14 Loanable Funds (in billions of dollars) 16 18 Investment, I(r) 20

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