Using the following diagram, find the equilibrium interest rate when the share of government purchases in the long run is 20 percent. Show what happens to all the variables if there is an increase in investment because of a new tax policy that encourages investment. R 7.5- 7.5- 7.5 7.5- 5.0- R 5.0- R 5.0- R 5.0- 2.5- 2.5- 2.5- 2.5- 0.0 0.0 0.0 0.0 62.5 65.0 67.5 Percent 12.5 15.0 17.5 Percent -2.5 0.0 2.5 Percent (a) Consumption Share (b) Investment Share (c) Net Exports Share Equilibrium interest rate = 4% Investment share=[ % Net export share= Consumption share=[ NG 72.5 80 87.5 Percent d) Nongovernment Share

Using the following diagram, find the equilibrium interest rate when the share of government purchases in the long run is 20 percent. Show what happens to all the variables if there is an increase in investment because of a new tax policy that encourages investment. R 7.5- 7.5- 7.5 7.5- 5.0- R 5.0- R 5.0- R 5.0- 2.5- 2.5- 2.5- 2.5- 0.0 0.0 0.0 0.0 62.5 65.0 67.5 Percent 12.5 15.0 17.5 Percent -2.5 0.0 2.5 Percent (a) Consumption Share (b) Investment Share (c) Net Exports Share Equilibrium interest rate = 4% Investment share=[ % Net export share= Consumption share=[ NG 72.5 80 87.5 Percent d) Nongovernment Share

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

Using the following diagram, find the equilibrium interest rate when the share of government purchases in the long run is
20 percent. Show what happens to all the variables if there is an increase in investment because of a new tax policy that
encourages investment.
R
7.5
7.5-
7.5
7.5-
5.0
R
5,0
R
5.0
R
5.0
2.5-
2.5
2.5
2.5
NG
Y
0.0
0.0
0.0
0.0
62.5 65.0 67.5
Percent
12.5 15.0 17.5
-2.5 0.0 2.5
72.5 80 87.5
Percent
Percent
Percent
(a) Consumption Share
(b) Investment Share
(c) Net Exports Share
d) Nongovernment Share
Equilibrium interest rate = 4%
Investment share =|
%
Net export share= |
%
Consumption share

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