Bundle: Principles of Economics, 8th + MindTap Economics, 1 term (6 months) Printed Access Card
8th Edition
ISBN: 9781337378710
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Chapter 26, Problem 5PA
To determine
The private saving, public saving , national saving, investment and equilibrium real interest rate.
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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 –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 rate
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.
Problem Set 4: Saving and Investment
Economists in Fantasialand, a closed economy, have collected the following information about the economy for a particular year: Y = 9000; C = 6000; T = 1500; G = 1700. The economists also estimate that the investment function is: I = 3300 - 100r, where r is the country’s real interest rate, expressed as a percentage (i.e. r = 1 means interest rate is one percent). Calculate private saving, public saving, national saving, investment, and the equilibrium real interest rate.
Chapter 26 Solutions
Bundle: Principles of Economics, 8th + MindTap Economics, 1 term (6 months) Printed Access Card
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- 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 Amountarrow_forwardSuppose the following equations represents a closed economy: Y= C + I + G Y = 4000 G = 500 T = 500 C = 500 + 0.7 (Y – T) I = 1000 – 40r In this economy, compute the value of consumption (C), private saving, public saving, and national saving. Also, find the equilibrium interest rate (r). Now suppose that government spending (G) rises (expansionary fiscal policy) to 300. Compute private saving, public saving, and national saving. Also, find the new equilibrium interest rate (r). In part (b), due to expansionary fiscal policy (increase in government spending), which of the two other components of aggregate demand changes, C or I? Why? (Hint: Note the real interest rate)arrow_forwardEconomists in Pakland, a closed economy, have collected the following information about the economy for a particular year: Y = Rs.10,500 C = Rs.6,000 T = Rs.1,500 G = Rs.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 savingBlank 1(Write Only numbers in the blank. Do not write plus signs, minus signs, commas, full stops, currency etc.)Public savingBlank 2(Write Only numbers in the blank. Do not write plus signs, minus signs, commas, full stops, currency etc.)National savingBlank 3(Write Only numbers in the blank. Do not write plus signs, minus signs, commas, full stops, currency etc.)InvestmentBlank 4The equilibrium real interest rateBlank 5(Write Only numbers in the blank. Do not write plus signs, minus signs, commas, full stops, currency etc.)If the government increases taxes to Rs.1,800, calculate private savingBlank 6((Write Only numbers in the…arrow_forward
- Economists in Funlandia, which has a closed economy, have collected the following information about the economy for a particular year: YY = = 10,00010,000 CC = = 6,0006,000 TT = = 1,5001,500 GG = = 1,7001,700 The economists also estimate that the investment function is: II = = 3,300−100r3,300−100r where rr 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 Amount Private Saving Public Saving National Saving Investment Equilibrium Real Interest Ratearrow_forwardThe following table contains data for a hypothetical closed economy that uses the dollar as its currency. Suppose GDP in this country is $1,175 million. Enter the amount for government purchases. National Income Account Value Government Purchases (GG) Taxes minus Transfer Payments (TT) 225 Consumption (CC) 625 Investment (II) 300 Complete the following table by using national income accounting identities to calculate national saving. In your calculations, use data from the preceding table. National Saving (S) = = $ million Complete the following table by using national income accounting identities to calculate private and public saving. In your calculations, use data from the initial table. Private Saving = = $ million Public Saving = = $ million Based on your calculations, the government is running a budget (a. surplus, b. deficit).arrow_forwardSuppose Ghana’s economy is described by the following equations:arrow_forward
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- An economy is described by the following set of equations: C = 2,600 + 0.8(Y – T) – 5,000r, I = 3,000 – 15,000r, G = 800, X = M = 0, T = 1,000 + 0.3Y. The real interest rate, expressed as a decimal, is 0.10 (that is, 10 percent). Suppose the flow of GDP consistent with full employment is 10,000. What real interest rate would achieve full employment?arrow_forwardSuppose GDP in this country is $660 million. Enter the amount for government purchases. National Income Account Government Purchases (G) Taxes minus Transfer Payments (T) Consumption (C) Investment (I) Private Saving = Complete the following table by using national income accounting identities to calculate national saving. In preceding table. National Saving (S) = $ Public Saving = $ = $ Value (Millions of dollars) Complete the following table by using national income accounting identities to calculate private and public saving. In your calculations, use data from the initial table. million million million 195 300 210 calculations, use data from the Based on your calculations, the government is running a budgetarrow_forwardConsider a closed economy with a gross domestic product (Y) of 800, consumption expenditure (C) of 500, government expenditure (G) of 100 and tax revenues (T) of 190. The figures are in billions of dollars. Suppose the investment expenditure function is I = 300 – 50r, where r is the real interest rate expressed as a percentage. a) State the equation between Y and the three components of expenditure. b) Calculate private saving (Sp), public saving (Sg), and national saving (S). c) Calculate investment (I). d) Calculate the equilibrium real interest rate and quantity of loanable funds. e) If the government ran a budget deficit of $30 billion in the next period, explain how this would affect the market for loanable funds.arrow_forward
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