Suppose that Maria receives a pay raise of $1,050 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 Maria would earn per year on her annual raise if she saves it. (Note: Assume that no income taxes are deducted.) Interest Rate Interest Earned (Dollars) (Dollars) (Percent) 8 20 A lower interest rate gives Maria incentive to save.

Suppose that Maria receives a pay raise of $1,050 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 Maria would earn per year on her annual raise if she saves it. (Note: Assume that no income taxes are deducted.) Interest Rate Interest Earned (Dollars) (Dollars) (Percent) 8 20 A lower interest rate gives Maria incentive to save.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

с
20
IX
*
A
B
INTEREST RATE (Percent)
25
5
0
0
A
D
20
40
60
SAVING (Billions of dollars)
80
100
Which of the curves on the previous graph best represents the relationship between the interest rate and the supply of saving?

2. The supply of saving
Suppose that Maria receives a pay raise of $1,050 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 Maria would earn per year on her annual raise if she
saves it. (Note: Assume that no income taxes are deducted.)
Interest Rate Interest Earned (Dollars)
(Dollars)
(Percent)
8
20
A lower interest rate gives Maria
incentive to save.
The following graph shows a variety of possible curves representing the supply of saving.

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