Using the saving-investment diagram, explain the effects on the interest rate of: a. The government announces a large on-time bonus for veterans that is financed by additional taxes on the general public. b. Consumers become more focused on the future and thus decide to save more. c. The government introduces an investment tax credit that is financed by cuts elsewhere such that overall tax collections remain unchanged.
1. Using the saving-investment diagram, explain the effects on the interest rate of:
a. The government announces a large on-time bonus for veterans that is financed by additional taxes on the general public.
b. Consumers become more focused on the future and thus decide to save more. c. The government introduces an investment tax credit that is financed by cuts elsewhere such that overall tax collections remain unchanged.
Disposable income is the income available with the household sector for the spending purpose. It is calculated by subtracting the taxes from the total income earned by household sector.
The disposable income is either consumed or saved.
The part of disposable income which is not spent is saved.
The amount which is spent for creating capital formation is known as the investment.
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