Answered: If Investment=f(r*) a. Explain with…

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter21: Financial Markets, Saving, And Investment

Section: Chapter Questions

Problem 5P

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Similar questions

What do you expect will happen to investment demand in this country?
Explain why changes in government spending are viewed as nearly always affecting national saving, while changes in taxes are viewed as having more ambiguous effects on national saving and real interest rates. Why does it matter?
A country recently had $800 billion worth of domestic investment and its residents purchased $400 billion worth of foreign assets. If foreigners purchased $100 billion of this country’s assets, what was this country’s saving? Explain how you found your answer.
The real interest influences the saving decision because a) the higher the real interest rate, the lower will be the exchange rate b) the higher the real interest rate the higher will be the demand for investment c) the higher the real interest rate, the more consumption you can have in the future via saving
Low interest rates means low inflation which means depreciated currency. This stimulates businessmen to invest abroad as interest rates are low. How can they invest abroad if the currency is depreciated? Wouldn't that be illogical and unfeasible? (According to Mankiw's textbook)Lower Interest rates encourage additional investment spending, which gives the economy a boost in times of slow economic growth. (Investopedia) Is this talking about investment spending abroad or investment spending in general? If Investment abroad increases how can that boost the economy? Aren't those statements contradictory?Recently, Turkey has experienced high inflation and high interest rates. IN spite of that its currency depreciated at historical levels. Is this because of other reasons than high inflation and high interest rates? Do we normally assume "ceteris paribus" when talking about this correlation? Even though its currency depreciated, there were investments made in Turkey. Why?
Consider the following data (in billion $) for a country in a particular year: (assume this country has Zero Transfer Payment Personal consumption expenditure (C) 200 Exports (x) 10 Government Purchases of goods and services (G) 120 Imports (m) 15 Gross Domestic Product (Y) 1800 Taxes 20 g. Dose the government has deficit, balance or surplus budget? h. What is the amount of investment financed by national saving? i. What is the amount of investment financed by borrowing from rest of the world? J. What is the meaning of transfer payment
“Is FDI a Good Sign for any country to Raise its capital” Justify the statement. Discuss the Reasons of Decreasing of Foreign Direct Investment Globally? Being a student of Finance How Can you increase FDI Globally in a good manner with suitable justification?
In a closed economy, if Y and T remained the same, but G rose, and C fell but by less than the rise in G, what would happen to public and national saving? a. public and national saving would rise b. public saving would fall and national saving would rise c. public saving would rise and national saving would fall d. public and national saving would fall
In an open economy, it is impossible to have national saving equal to domestic investment.Answer true, false, or uncertain. Please briefly explain your answer.
Draw a diagram for Saving and Investment in a small open economy.Assume the world real interest rate is above the closed equilibrium interestrate for the country you drew. Is this country a foreign lender or foreignborrower? Explain with the intuition of the saving and investment functions
If at a given real interest rate desired national saving is $115 billion, domestic investment is $60 billion, and net capital outflow is $40 billion, then at that real interest rate in the loanable funds market there is a A. surplus. The real interest rate will fall. B. surplus. The real interest rate will rise. C. shortage. The real interest rate will rise. D. shortage. The real interest rate will fall.
Given the following on a closed economy, determine the following The level of Private savings The level of Public savings The level of national saving

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If Investment=f(r*) a. Explain with pictures how it affects the balance of Supply/Saving and Investment Demand if it increases investment demand abroad