Macroeconomics: Principles and Policy (MindTap Course List)
13th Edition
ISBN: 9781305280601
Author: William J. Baumol, Alan S. Blinder
Publisher: Cengage Learning
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Chapter 9.A, Problem 3TY
To determine
To calculate: The savings in equilibrium and comparison with investment.
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If consumers decide to increase saving, then C decreases, r decreases, I increases, and Y:
In the long run, what happens to consumption in the economy when people are saving less?
a) remains the same
b) cannot tell from the graph
c) decreases
d) increases
Classify each of the following based on the macroeconomic definitions of saving and investment.
Saving
Investment
Crystal borrows money to build a new lab for her engineering firm.
Hilary purchases stock in Pherk, a pharmaceutical company.
Edison takes out a mortgage for a new home in Detroit.
Brian purchases a corporate bond issued by a car company.
Chapter 9 Solutions
Macroeconomics: Principles and Policy (MindTap Course List)
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- Again, the following graph depicts the market for loanable funds. An investment tax credit effectively lowers the tax bill of any firm that purchases new capital in the relevant time period. Suppose the government repeals a previously existing investment tax credit. Shift the appropriate curve(s) on the following graph to show the impact of this policy. INTEREST RATE (Percent) pemand Supply QTY OF LOANABLE FUNDS (Billions of dollars) The repeal of the previously existing tax credit causes the interest rate to and the level of investment toarrow_forwardWith the help of consumption function C=10+0.5Y, calculate savings at an income level of $500arrow_forwardExplain why the saving curve slopes upward and the investment curve slopes downward in the saving–investment diagram. Give two examples of changes that would shift the saving curve to the right, and two examples of changes that would shift the investment curve to the right. (Note: insert hand drawn picture(s) into the word file to explain your answer.)arrow_forward
- What is the difference between consumption and autonomous consumption?arrow_forwardClassify each of the following based on the macroeconomic definitions of saving and investment. Saving Investment Neha borrows money to build a new lab for her engineering firm. Teresa purchases stock in Pherk, a pharmaceutical company. Sam purchases a new condominium in San Francisco. Lorenzo purchases a certificate of deposit at his bank.arrow_forwardClassify each of the following scenarios listed in the table below using the macroeconomic definitions of saving and investment. Saving Investment Manuel buys a government bond. Poornima borrows money to build an addition to a lab owned by her engineering firm. Valerie purchases shares of stock in Warm Breeze, a cloud computing company. Shen takes out a loan and uses it to build a new cabin in Idaho.arrow_forward
- What does the consumption function showarrow_forwardWhich of the following will increase the slope of the demand curve in the goods market to indicate an increase in the level of output and income? Select one: a. An increase in autonomous investment. b. An increase in the marginal propensity to consume. c. An increase in government spending. d. An increase in taxation.arrow_forwardAssume that the unintended investment is negative. Briefly outline how the level of Ye will change in response to this. how is the impact of change related to the size of the multiplier?arrow_forward
- I consumed all my income at every level of income.Draw my consumption and saving function.What are my MPC and MPS? Explain why it must always be true that MPC+MPS equal to 1?arrow_forwardConsumption function C = 32 +0.8 Y. a. Create saving function b. How much is consumption when saving = 0 c. How much income when the savings are 20arrow_forwardDraw a diagram to describe this: Marginal consumption Cm decreases -> The amount of money consumed C also decreases => Household saving S (Saving) increases because S = Yd - C -> The supply of loanable funds increases (due to an increase in household savings) -> the lending interest rate decreases (in the condition that the demand for loan funds remains constant)arrow_forward
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