In the long run, what happens to consumption, investment, and the interest rate when the government increases taxes in a closed economy? explain
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In the long run, what happens to consumption, investment, and the interest rate
when the government increases taxes in a closed economy? explain
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- In the long run, what happens to consumption, investment, and the interest rate when thegovernment increases taxes in a closed economy?Plase provide an answer detaiing what happens to each if this is done. an answer for consumption, investment and the interest rate. A 3 part answer.What happens in a private closed economy when aggregate expenditures exceed GDP? a. GDP will decline b. Business inventories will rise c. Saving will decline d. Business inventories will fallGraphically illustrate (draw) and explain the effect of a sustained increase in savings on the growth of output (Provide explanations)
- What does it mean by the logic: When output is too low, what needed is an increase in demand for goods and services. Investment is one component of demand, and saving equals investment. Therefore, if the government could just convince households to attempt to save more, then investment and output would increase.consider the following hypothetical economy. The economy is closed, meaning the economy neither exports or imports. And the economy national saving us 20 trillion and government expenditure is 5 trillion. What is the level of investmentGraphically illustrate (draw) and explain the effect of a sustained increase in savings on the growth of output
- Consider an economy that uses exclusively labor and capital to produce.Suddenly, the government of the economy plans to permanently increase the level ofgovernment purchases. Please use words and figures to illustrate your answers.(1) Suppose the economy is a closed one. How does the long-run GDP of the economychange because of the increased government purchases? (2) Will your answer to (1) be changed if the economy is an open one? Explain youranswers briefly.(3) Suppose the economy is a closed one. Will the increased government purchaseschange the equilibrium interest rate?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.arrow_forward Question Asked Aug 18, 2020 25 views Consider the following model of an economy operating with fixed wages, prices and interest rates and hasexcess capacity. Adsume all figures are I Zambian kwacha. C=100+0.8yd, T=100+25Y, G=980 and I= 500 Where c is consumption, yd is disposable income, T is taxes net of transformers, G is government spending on goods and services and I is investments. Is the government running a surplus or deficit Show the impact of a reduction in government spending by 80 on the equilibrium level of national income Illustrate your new equilibrium in the same Keynesian cross diagram
- "In the financial sector and in the economy, commercial banks play an important part. As a core component of the financial economy, banks efficiently assign savers' assets to risk-takers." Discuss.Government Policies That Affect Saving and Investment” 1 Taxes and saving 2 Taxes and investment You are required to take help from the “Book of Mankiw” and solve the above two Policy scenarios separately. You are required to edit graph and then explain it in detail after incorporating changes in policy-2, as policy-1 has been solved already. You are just required to explain policy-1 in few lines in your own words. While for Policy-2 first read the chapter and then edit the graph given. After incorporating changes/shifting, explain policy-2 in your own words.In the long run, what happens to consumption, investment, and the interest ratewhen the government increases taxes in a closed economy?If inflation rises from 10 to 14 percent, explain what happens to real and nominal interest rates according to the Fisher effect?
