and Use the data above to calculate: Consumption = $ %3D In a closed economy, the loanable funds market will achieve equilibrium when the interest rate (r) is equal to %. In an open economy, assuming the domestic country is "small" and the world interest rate (r*) is equal to 5 percent, net foreign investment and net exports %3D Assume government spending is increased from 1,000 to 1,200, with no change in taxes. This policy is expected to change the values of NFl and NX to Increasing the government's budget deficit caused the country's trade deficit to (increase or decrease?)

and Use the data above to calculate: Consumption = $ %3D In a closed economy, the loanable funds market will achieve equilibrium when the interest rate (r) is equal to %. In an open economy, assuming the domestic country is "small" and the world interest rate (r*) is equal to 5 percent, net foreign investment and net exports %3D Assume government spending is increased from 1,000 to 1,200, with no change in taxes. This policy is expected to change the values of NFl and NX to Increasing the government's budget deficit caused the country's trade deficit to (increase or decrease?)

MACROECONOMICS FOR TODAY

10th Edition

ISBN:9781337613057

Author:Tucker

Publisher:Tucker

Chapter11: Fiscal Policy

Section: Chapter Questions

Problem 5SQP

See similar textbooks

Similar questions

Assume taxes are zero and an economy has a consumption function of C = 0.80 (Yd) + $879.06. How much savings take place if disposable income is equal to 3,258.02? Round your answer to two digits after the decimal and include a negative sign if you find negative savings which is borrowing.
Suppose the Biden administration permanently increases government purchases. (You shouldassume that the economy is at Y* before the increase.)a. What will be the impact on the economy’s normal real interest rate (r*) and normalinvestment (I*)? Explain with the help the long-run savings and investment diagram
The classification of government spending as an investment or having an investment-effect depends on: a. How the spending affects current consumption. b. How the spending affects future productivity. c. How the spending affects current stock prices. d. How the spending affects future stock prices.
use analytic exposition and an appropriate diagram, to explain how the permanent income theory of construction reconcile the results of cross- section and time -series estimates of the Keynesian consumption function
Suppose that the marginal propensity to consume is dC/dy= 0.4 + (1 / sq. root of 3y + 10)(in billions of dollars) and that consumption is $9 billion when disposable income is $0. Find the nationalconsumption function C. Round numbers in your answer to two decimal places when appropriate.
In each of the following cases, determine whether the IScurve shifts to the right or left, does not shift, or is indeterminate in the direction of shift.a. The real interest rate rises.b. The marginal propensity to consume declines.c. Financial frictions increase.d. Autonomous consumption decreases.e. Both taxes and government spending decrease by thesame amount.f. The sensitivity of net exports to changes in the realinterest rate decreases.g. The government provides tax incentives for researchand development programs for firms
Prove that Sp=B implies Y=C+G, where, Sp=Quantity of private savings B=Quantity of debt issued by the government in the current period Y=Aggregate income in the current period C=Aggregate Consumption in the current period G=Quantity of government purchases
Identify how planned investment will change in each scenario. In an effort to reduce constant budget deficits, Congress announces plans to increase the corporate income tax rate. Due to the Congress, planned investment will increase, decrease, or stay the same? A major recession has reduced consumption spending, which has hurt profit levels for Aston-Benz, a high-end car manufacturer. Due to the recession, planned investment will increase, decrease, or stay the same?
Assume i=0%, beta=1. Consumer has income of 80 in year 1, 100 in year 2. Now suppose gov't gives consumers a free check of 10 in year 1. Suppose consumers are naive (they don't anticipate the free check is financed by borrowing from China, which needs to be paid back through more tax in period 2). Consumer actually consumes ____ in year 2. Hint: when consumers are naive, they will believe they have 80+10=90 income in period 1, and 100 income in period 2. Hint 2: when year 2 comes, gov't needs to pay back the debt.
The government decreases current taxes, while holding government spending in the present and the future constant. Using diagrams, determine the equilibrium effects on consumption, investment, the real interest rate, aggregate output, employment, and the real wage. What is the multiplier, and how does it differ from the government expenditure multiplier? Now suppose that there are credit market imperfections in the market for consumer credit, for example due to asymmetric information in the credit market. Repeat part (a), and explain any differences in your answers in parts (a) and (b)
Crowding out will be greater A. the more sensitive investment spending is to changes in the interest rate. B. if the economy is in recession, rather than at full employment. C. the further equilibrium GDP is below potential GDP. D. the less sensitive consumption spending is to changes in the interest rate.
Assume i=0%, beta=1. Consumer has income of 80 in year 1, 100 in year 2. Now suppose gov't gives consumers a free check of 10 in year 1. Suppose consumers are naive (they don't anticipate the free check is financed by borrowing from China, which needs to be paid back through more tax in period 2). Consumer believes they will consume ____ in year 2. Hint: when consumers are naive, they will believe they have 80+10=90 income in period 1, and 100 income in period 2.