Using Up and Down arrows or a Dash for no change, show how an increase in government spending, holding other factors constant, affect the level of: a. public saving b. private saving c. national saving d. the equilibrium interest rate_ e. the equilibrium quantity of investment

Using Up and Down arrows or a Dash for no change, show how an increase in government spending, holding other factors constant, affect the level of: a. public saving b. private saving c. national saving d. the equilibrium interest rate_ e. the equilibrium quantity of investment

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter6: Demand Relationships Among Goods

Section: Chapter Questions

Problem 6.5P

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Question

Economics

10. Consider a competitive economy in which factor prices adjust to keep the factors of
production fully employed, and the interest rate adjusts to keep the supply and demand
for goods and services in equilibrium. We can describe this economy thru the following
set of equations:
Y=AK L(-a)
Y=C+I+G
C=C(Y-T)
I=1(r)
Using Up and Down arrows or a Dash for no change, show how an increase in
government spending, holding other factors constant, affect the level of:
a. public saving
b. private saving
c. national saving
d. the equilibrium interest rate_
e. the equilibrium quantity of investment
11. Consider a production function for an economy:
Y=20(L³K*N¹)
Where L represents labor, K represents capital, and N represents land.
In this economy, the factors of production exist
in
fixed supply with L-100, K-100, and N-100.
a. Determine the level of output in this country_
b. Does this production function exhibit constant returns to scale?

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Step 1: Introduction

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Step 2: A) Public savings

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Step 3: B) Private savings

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Step 4: C) National savings

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Step 5: D) The equilibrium interest rate

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Step 6: E) The equilibrium quantity of investment

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