4. Apply the classical theory. Consider a hypothetical economy described below: Y=C+I+G C = 50+cY - T I = 300 - 20r Y = 2,000 T = 900 G = 1,500 c = 0.6 where Y is output, C is consumption, I is investment, G is government purchases, Tis taxes, and r is real interest rate in percent. a) Calculate private saving, public saving, and national saving.

4. Apply the classical theory. Consider a hypothetical economy described below: Y=C+I+G C = 50+cY - T I = 300 - 20r Y = 2,000 T = 900 G = 1,500 c = 0.6 where Y is output, C is consumption, I is investment, G is government purchases, Tis taxes, and r is real interest rate in percent. a) Calculate private saving, public saving, and national saving.

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter18: Savings,investment And The Financial System

Section: Chapter Questions

Problem 5PA

See similar textbooks

Similar questions

7, How will planned investment spending change as the following events occur? a. The interest rate falls as a result of Federal Reserve policy. b. The U.S. Environmental Protection Agency decrees that corporations must upgrade or replace their machinery in order to reduce their emissions of sul- fur dioxide. c. Baby boomers begin to retire in large numbers and reduce their savings, resulting in higher interest rates.
b. Explain the difference between saving and investment as defined by a macroeconomist. c. Which of the following situations in c (i) & c (ii) represent investment? Saving? Explain(i) Your family takes out a mortgage and buys a new house. (ii) You use your paycheque to buy stock in Sagicor Financial Services.
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?
Question 3. Suppose that an economy can be described by the following equations: Y=C+I+ G, Y=5,000, G= 1,000, T=1,000, C= 250 + 0.75(Y-T), I= 1,000 – 50r. a. In this economy, compute private saving, public saving, and national saving b. Find the equilibrium interest rate (measured in percentage points). c. Now suppose that G rises to 1,250. Compute private saving, public saving and national saving. d. Find the new equilibrium interest rate.
If household saving decreases by $4 million, business saving increases by $4 million, and the government budget deficit decreases by $4 million, then private saving ______ and public saving ______. Select one: a. increases; increases b. increases; decreases c. does not change; increases d. does not change; decreases..... expl why
1. Consider an economy described as follows: Y = C +I+ G. Y = 8,000. G= 2,500. T= 2,000. C = 1000 + 2/3(Y-T). || I=1,200 - 150i. a. In this economy, compute private saving, public saving, and national saving. b. Find the equilibrium interest rate. c. Now suppose that G is reduced by 600. Compute private saving, public saving, and national saving. d. Find the new equilibrium interest rate.
2. Suppose Economist in England, a closed economy, have collected the following information about the economy for a particular year: GDP equals 10.000 Consumption equals 6.000 Tax revenue equals 1.500 Government purchases equals 1.700 The economist 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 equilibrum interest rate.
3. Suppose the incoming Biden administration permanently increases taxes and government purchases by equal amounts. a. What will be the impact (if any) on output in the short run? b. What will be the impact on the economy's normal real interest rate (r*) and normal investment (I*, which is the same as normal saving, S*)?
Suppose that GDP is $8 billion, taxes are $1.5 billion, private saving is $0.5 billion, and public saving is 0.2 billion. Assuming the economy is closed, calculate the size of:(i) Consumption (ii) Investment (iii) Government Spending (iv) National Savings b. Explain the difference between saving and investment as defined by a macroeconomist. c. Which of the following situations in c (i) & c (ii) represent investment? Saving? Explain(i) Your family takes out a mortgage and buys a new house. (ii) You use your paycheque to buy stock in Sagicor Financial Services.
QUESTION 2 Consider the closed-economy market-clearing model. Assume that the marginal propensity to consume is 0.8. Tax revenue decreases by $5 billion, while output and government spending remain the same (a) Calculate the dollar change in consumption. (b) Calculate the dollar change in national saving. (c) Does the equilibrium real interest rate increase, decrease, or stay the same? n toolhar nress ALT+F10 (PC) or ALT+FN+F10 (Mac).