Which of the following statements accurately describe the effect of the increase in government borrowing? Check all that apply. Private saving decreases by less than $20 billion. National saving decreases by more than $20 billion. Public saving decreases by exactly $20 billion. Investment decreases by less than $20 billion. The increase in government borrowing will result in a smaller change in the interest rate if the supply of loanable funds is The more elastic the demand for loanable funds, the This belief would cause people to save would elastic. the change in national saving as a result of the increase in government borrowing. Suppose households believe that greater government borrowing today implies higher taxes to pay off the government debt in the future. today, which would private saving and the effect of the reduction in public saving on the market for loanable funds. the supply of loanable funds. This Save & Continue Continue without saving

Which of the following statements accurately describe the effect of the increase in government borrowing? Check all that apply. Private saving decreases by less than $20 billion. National saving decreases by more than $20 billion. Public saving decreases by exactly $20 billion. Investment decreases by less than $20 billion. The increase in government borrowing will result in a smaller change in the interest rate if the supply of loanable funds is The more elastic the demand for loanable funds, the This belief would cause people to save would elastic. the change in national saving as a result of the increase in government borrowing. Suppose households believe that greater government borrowing today implies higher taxes to pay off the government debt in the future. today, which would private saving and the effect of the reduction in public saving on the market for loanable funds. the supply of loanable funds. This Save & Continue Continue without saving

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Africa's government has increased its spending this year, leading to a growing budget deficit. How will this growing budget deficit affect the economy? Your answer should discuss interest rates, private investment, and aggregate expenditure.
Justify for the correct option
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For a closed economy, GDP is $18 trillion, consumption is $13 trillion, taxes are $2 trillion and the government runs a deficit of $1 trillion. What are private saving and national saving?
The current market rate of interest is 10 percent. At that rate of interest, businesses borrow $300 billion per year for investment and consumers borrow $50 billion per year to finance purchases. The government is currently borrowing $150 billion per year to cover its budget deficit. a. Derive the market demand for loanable funds, and show how investors and consumers will be affected if the budget deficit increases to $250 billion per year. b. Assuming taxpayers do not anticipate an increase in the future market rate of interest due to the increase in budget deficit, show the impact of the increase in the budget deficit on the market for loanable funds. c. How would your conclusion differ if taxpayers fully anticipate future tax increases to offset the increase in the budget deficit? d. Do you think the Ricardian Equivalence is realistic?
Refer to the following graph to answer the next three questions. Interest rate $50 billion S 5% 4% D2 D₁ $125 $150 Savings, investment, government borrowing (billions of dollars) According to the graph, the amount of private investment after government borrowing is billion. $100 $25 $200 O $175 $150
From the 1960s to 2020, transfer payments A. have declined by half as a percentage of total federal government expenditures. B. have grown very slowly as a percentage of total federal government expenditures. C. remained the same percentage of total federal government expenditures. D. have risen from 25 percent to just over 50 percent percent of federal government expenditures.
If expectations about future income change, there is no change in saving until income actually changes. a decrease in saving if people expect income to increase in the future. an increase in saving if people expect income to increase in the future. a decrease saving if people expect income to decrease in the future. a change in the quantity of loanable funds supplied and a movement along the supply of loanable funds curve.
Suppose GDP equals $30 trillion, consumption equals $20 trillion, the government spends $4 trillion and has a budget deficit of $900 billion. Required: Find net taxes and public saving
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INTEREST RATE (Percent) Demand LOANABLE FUNDS (Billions of dollars) Supply 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 20%. Now suppose there is an increase in the tax rate on interest income, from 20% to 25%. Demand Shift the appropriate curve on the graph to reflect this change. This change in the tax treatment of interest income from saving causes the equilibrium interest rate in the market for loanable funds to and the level of investment spending to Shift the appropriate curve on the graph to reflect this change. The implementation of the new tax credit causes the interest rate to Supply Scenario 2: An investment tax credit effectively lowers the tax bill of any firm that purchases new capital in the relevant time period. Suppose the government implements a new investment tax credit. This change in spending causes the government to run a budget Shift the…