Chapter 7, Problem 1QE

Some studies have found that saving is not very sensitive to the rate of return on saving. a.true b.false

Is it possible for total saving to fall when people become more thirfty?

Your two younger brothers both looked at your notes and thought the answer to the question “what savings rate will make your country have the highest level of consumption?” was obvious. Corey thought “obviously you should save 0% so that you can spend all of your income on consumption.” Eric thought “obviously you should save 100% so that you can invest and become super rich.” Both Corey and Eric both can’t see the big picture about steady state consumption. Write a short explanation to help them see the big picture. Why is the optimal saving rate generally not 0% or 100%?  .

How does a change in real interest rate affect investment spending?

How does a decrease in the tax rate on income earned on saving affect saving, investment, the interest rate, and economic growth?

In the graph you've just made, how does a tax on interest income influence the real interest rate and investment? A tax on interest income _______ loanable funds, which _______ the real interest rate and _______ investment. A. decreases the demand for; raises; decreases B. decreases the supply of; raises; decreases C. increases the supply of; lowers; increases D. increases the demand for; lowers; increases Screenshot attached thanks

“An economy which does not have a strong manufacturing infrastructure cannot continue to make required investment on itself. An economy that grows only by service sector means that it is built on sand.” Sony Member and CEO Akia Morito 1992. Do you agree with Akia Morito’s idea?

Explain the difference between saving and investment as defined by a macroeconomist. Which of the following situations represent investment and which represent saving? Explain.a. Your family takes out a mortgage and buys a new house.You use your $200 paycheck to buy stock in Africel.Your roommate earns $100 and deposits it in his account at a bank.You borrow $1,000 from a bank to buy a car to use in your pizza delivery business.The interest rate is 7 percent. Use the concept of present value to compare $200 to be received in 10 years and $300 to be received in 20 years.A company has an investment project that would cost $10 million today and yield a payoff of $15 million in 4 years.Should the firm undertake the project if the interest rate is 11 percent? 10 percent? 9 percent? 8 percent?Can you figure out the exact cutoff for the interest rate between profitability and nonprofitability?

How do the sophisticated financial systems of modern economies affect the relationship between saving and investment?