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- Suppose that consumer spending initially rises by $5 billion for every 1 percent rise in household wealth and that investment spending initially rises by $20 billion for every 1 percentage point fall in the real interest rate. Also assume that the economy’s multiplier is 4. b. In what direction and by how much will it eventually shift?1. Given the following on a closed economy.C = 40 + 0.8Yd C= consumptionI = 55 – 200r I= InvestmentG = 20 G = government spendingT = 20 T = TaxesYe = 400 Ye = National Income r = rate of interestDetermine the following:-The equilibrium level of consumption-The level of investment-The level of interest rate-The level of Private savings-The level of Public savings-The level of national savingsIn a closed economy with no government, aggregate expenditure is Select one: O a. None of the options O b. Net Tax plus Consumption O c. consumption plus the MPC O d. saving plus investment.
- The following table shows data for the economy before the decrease in saving. Suppose that the decrease in saving causes consumption to rise from $280 million to $320 million. Assume Say's law holds in this economy. Fill in the data for the economy after the decrease in saving. Before Saving Decrease After Saving Decrease Consumption (C) $280 million $320 million Investment (I) $200 million $ million Government Purchases (G) $250 million $ million Exports (EX) $500 million $500 million Imports (IM) $300 million $300 million As a result of the decrease in saving, total expenditures will .For an economy the following functions have been given:C = 100 + 0.8YS = -100 + 0.2YI = 120 – 5rMs = 120Md = 0.2Y – 5rCalculate the following:5.1.1. IS equation 5.1.2. LM equation 5.1.3. Equilibrium level of income 5.1.4. Equilibrium level of interest rate. 5.1.5 Calculate National saving. 5.1.6 Calculate money demand 5.1.7 Find consumptionSuppose that the real interest rate is 6%. Next, assume that some factors changes, such that the expected rate of return, declines by  two percentage points at each prospective level of investment. Assuming no change in the real interest rate, by how much and in what direction will the investment change?  which of the following might cause this change: (a) a decision to increase inventories; (b) an increase in excess production capacity.
- Given that the individual is a saver, show the impact of:i) An increase in interest rate on Current and future consumption levels when SE > IEii) A decrease in interest rate on Current and future consumption levels when SE < IEQuestion 1. When the interest rate increases, the price of consumption when old relative to the price of consumption when youngoptions: O. decreasesO. increases O. has an indeterminate change O. does not changeProblem 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.
- 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.The year is 2010. The government has thought about strengthening the public following the collapse with an increase interest compensation for indebted households (direct payments to these parties). At the same time, the government wants to stimulate total expenditure and economic activity with the payment of such benefits. Statisticians have told the government that each person spends 65% of all their income he will get and each of them who gets the spending, he also spends 65% of it and this process keeps continue without end. Let's assume that the government will allocate 5 billion ISK to of the project. a. How much can it be estimated that the economy will recover in terms of of the total consumption that will occur due to these interest benefits taking into account the multiplier effect (e. Multiplier principle)? b. How much will the economy be stimulated if individuals spend 85% of the income they receive?China’s real GDP increased 6.9 percent in the first quarter of 2017 from a year earlier.Investment grew by 9.2 percent and retail sales by 10.9 percent. In current prices, GDPincreased by 11.8 percent from a year earlier.1. Explain how China’s real GDP can grow at a 6.9 percent rate when consumption andinvestment grew faster than 6.9 percent. 2. Explain why the growth rate of GDP in current prices does not provide informationabout how quickly the economy is really growing.
