Confused and not sure how to answer The following graph shows the saving curve (s) and the investment curve (1) for a smalleconomy.Adjust the following graph to show the effect of a decrease in saving at any interest rate inthis economy, which behaves according to the classical view.INTEREST RATEThe Classical View of the Credit MarketDOLLARS SAVED OR INVESTEDWhich of the following is an argument by the classical economists?The lower the interest rate is, the fewer funds firms borrow and invest.The lower the interest rate is, the higher the reward is for saving.The higher the interest rate is, the more funds firms borrow and invest.The lower the interest rate, the more funds firms borrow and invest.SStep 2: The Effect of Saving on Total ExpendituresThe following table shows data for the economy before the decrease in saving. Suppose thatthe decrease in saving causes consumption to rise from $445 million to $480 million. AssumeSay's law holds in this economy.Fill in the data for the economy after the decrease in saving.Consumption (C)Investment(I)Government Purchases (G)Exports (EX)Imports (IM)Before Saving Decrease After Saving Decrease$445 million$480 million$285 millionmillion$220 million$700 million$780 millionAs a result of the decrease in saving, total expenditures will$$million$700 million$780 million.

Part-1) According to the classical economists the saving and investment will be always equal. When…

The following graph shows the saving curve (S) and the investment curve (1) for a small economy. Adjust the following graph to show the effect of a decrease in saving at any interest rate in this economy, which behaves according to the classical view. (?)

The following graph shows the saving curve (S) and the investment curve (1) for a small economy. Adjust the following graph to show the effect of a decrease in saving at any interest rate in this economy, which behaves according to the classical view. (?)

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter20: Exchange Rates And The Macroeconomy

Section: Chapter Questions

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Concept explainers

Public Saving

Public saving deals with the amount which has been in excess after meeting all the obligatory expenses and investment of the government. Taxes are collected by the government to meet its day-to-day expenditures. The obligatory expenses include all those expenses which are mandatory for the government. It cannot be avoided as it is inevitable.

Question

Confused and not sure how to answer

The following graph shows the saving curve (s) and the investment curve (1) for a small
economy.
Adjust the following graph to show the effect of a decrease in saving at any interest rate in
this economy, which behaves according to the classical view.
INTEREST RATE
The Classical View of the Credit Market
DOLLARS SAVED OR INVESTED
Which of the following is an argument by the classical economists?
The lower the interest rate is, the fewer funds firms borrow and invest.
The lower the interest rate is, the higher the reward is for saving.
The higher the interest rate is, the more funds firms borrow and invest.
The lower the interest rate, the more funds firms borrow and invest.
S
Step 2: The Effect of Saving on Total Expenditures
The following table shows data for the economy before the decrease in saving. Suppose that
the decrease in saving causes consumption to rise from $445 million to $480 million. Assume
Say's law holds in this economy.
Fill in the data for the economy after the decrease in saving.
Consumption (C)
Investment
(I)
Government Purchases (G)
Exports (EX)
Imports (IM)
Before Saving Decrease After Saving Decrease
$445 million
$480 million
$285 million
million
$220 million
$700 million
$780 million
As a result of the decrease in saving, total expenditures will
$
$
million
$700 million
$780 million.

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