Principles of Economics (12th Edition)
12th Edition
ISBN: 9780134078779
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
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Chapter 24, Problem 1.5P
To determine
Evaluating the statement.
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Economists often argue that a large increase in government purchases – such as for the military – will crowd out private-sector spending. Use the investment-saving diagram to defend or to refute their premise.
Economists in Funlandia, which has a closed economy, have collected the following information about the economy for a particular year:
Y = 11,500
C = 7,000
T = 1,300
G = 1,900
The economists also estimate that the investment function is:
I 3,200 - 100r
where r is the country's real interest rate, expressed as a percentage.
Complete the following table by calculating private saving, public saving, national saving, investment, and the equilibrium real interest rate.
Component
Private Saving
Public Saving
National Saving
Investment
Equilibrium Real Interest Rate
Amount
Explain and compare the following terms: Saving intensity and break-even investment intensity.
Chapter 24 Solutions
Principles of Economics (12th Edition)
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- US Real GDP fell by 9 percent during the 2nd quarter of 2020. Real investment spending fell by 16.9 percent during Q2 of 2020, and investment spending makes up about 20 percent of GDP. How much did the decline in investment spending contribute to the decline in real GDP in the US during Q2 of 2020?arrow_forwardWhat is the meaning of "animal spirits"? How do these relate to planned investment spending and to unplanned investment spending?arrow_forwardEconomists in Funlandia, a closed economy, have collected the following information about the economy for a particular year: Y = 10,000; C = 6,000; T = 1,500; G = 1,700. The economists also estimate that the investment function is: I =3,300 –100r where r is the country’s real interest rate, expressed as a percentage. Calculate private saving, public saving, national saving, investment, and the equilibrium real interest ratearrow_forward
- Economists in Funlandia, a closed economy, have collected the following information about the economy for a particular year: Y = 10,000 C = 6,000 T = 1,500 G = 1,700 The economists also estimate that the investment function is: I = 3,300 – 100 r, Where r is the country’s real interest rate, expressed as a percentage. Calculate private saving, public saving, national saving, investment, and the equilibrium real interest rate.arrow_forwardGive written answer with explanation and conclusion A government policy that would reduce the saving rate is ? a) giving tax breaks to increase the real return that savers receive b) eliminating the social security system c) increasing the government budget surplus by cutting government spending d) switching the tax system to tax consumption instead of incomearrow_forwardCalculate investment expenditure from the following data about an economy which in equilibrium: National income =$1000 Marginal propensity to save=$0.25 Autonomous consumption expenditure=$200arrow_forward
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