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1)Is this economy where the CB sets the money supply (exogenous) or sets the interest rates (endogenous)? How would you represent the LM relation in equations?
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- Explain how changes in interest rates and rates of return on various investment options will affect the amount of money that businesses are willing to invest to increase output.Given the following on a closed economy, determine the following The level of Private savings The level of Public savings The level of national savingConsider a closed economy without a government. If the GDP of the economy is $63,000 and the consumption in the economy is $45,000, the saving rate in the economy is ________. 86 percent 24 percent 57 percent 75 percent
- In a closed economy,a change in the capital stock depends on how much is saved, and on depreciation, which negatively affect the capital stock. True or falseThe presence of a well developed financial market and a wide array of financial instruments is beneficial to the overall economy since the flow of funds would be greater. * True or False?For each of the following pairs, which bond would you expect to pay a higher interest rate? Explain! a). a bond of the U.S. government or a bond of an East European government b). a bond that repays the principal in year 2015 or a bond that repays the principal in year 2040 c). a bond from Coca-Cola or a bond from a software company you run in your garage d). a bond issued by the federal government or a bond issued by New York State
- In the long run, what happens to interest rates when the government increases taxes in closed economy? Could you help me provide insight on how interest rates are effected by increased taxed in closed economy.Which of the following best describes the catch-up effect? Question 14 options: It is easier for a country to grow fast and "catch up" with richer countries if it starts out relatively poor. Saving will always "catch up" with investment spending. If investment spending is low, increased saving will help investment to "catch up." Rich countries aid relatively poor countries so as to help them "catch up."Which of the following situations represent investment or saving? Explain. Your family takes out a mortgage and buys a new house. You use your $200 paycheck to buy stock in AT&T. 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. For each of the following pairs, which bond would you expect to pay a higher interest rate? Explain. A bond that repays the principal in year 2030 or a bond that repays the principal in year 2040. 2 . A bond from Coca-Cola or a bond from a software company you run in your garage.
- Distinguish between saving and investment.Suppose we have a financial market where Qd = −1r + 26 Qs = 1.5r + 1 a. What is the equilibrium interest rate and quantity of loanable funds? r* = % Q* =The following graph shows the market for loanable funds. For each of the given scenarios, adjust the appropriate curve on the graph to help you complete the questions that follow. Treat each scenario separately by resetting the graph to its original state before examining the effect of each individual scenario. (graph in image) Scenario 1: Suppose savers either buy bonds or make deposits in savings accounts at banks. Initially, the interest income earned on bonds or deposits is taxed at a rate of 20%. Now suppose there is an increase in the tax rate on interest income, from 20% to 25%. Shift the appropriate curve on the graph to reflect this change. This change in the tax treatment of interest income from saving causes the equilibrium interest rate in the market for loanable funds to (a. fall, b. rise) and the level of investment spending to (a. increase, b. decrease). Scenario 2: An investment tax credit effectively lowers the tax bill of any firm that purchases…