Macroeconomics
21st Edition
ISBN: 9781259915673
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Question
Chapter 10, Problem 5RQ
To determine
Investment decision.
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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.
Why is there a trade-off between the amount of consumption that people can enjoy today and the amount of consumption that they can enjoy in the future? Why can’t people enjoy more of both? How does saving relate to investment and thus to economic growth? What role do banks and other fifinancial institutions play in aiding the growth process?
How does a decrease in the tax rate on income earned on saving affect saving, investment, the interest rate, and economic growth?
Chapter 10 Solutions
Macroeconomics
Ch. 10.2 - Prob. 1QQCh. 10.2 - Prob. 2QQCh. 10.2 - Prob. 3QQCh. 10.2 - Prob. 4QQCh. 10.5 - Prob. 1QQCh. 10.5 - Prob. 2QQCh. 10.5 - Prob. 3QQCh. 10.5 - Prob. 4QQCh. 10 - Prob. 1DQCh. 10 - Prob. 2DQ
Ch. 10 - Prob. 3DQCh. 10 - Prob. 4DQCh. 10 - Prob. 5DQCh. 10 - Prob. 6DQCh. 10 - Prob. 7DQCh. 10 - Prob. 8DQCh. 10 - Prob. 9DQCh. 10 - Prob. 1RQCh. 10 - Prob. 2RQCh. 10 - Prob. 3RQCh. 10 - Prob. 4RQCh. 10 - Prob. 5RQCh. 10 - Prob. 6RQCh. 10 - Prob. 7RQCh. 10 - Prob. 8RQCh. 10 - Prob. 9RQCh. 10 - Prob. 1PCh. 10 - Prob. 2PCh. 10 - Prob. 3PCh. 10 - Prob. 4PCh. 10 - Prob. 5PCh. 10 - Prob. 6PCh. 10 - Prob. 7PCh. 10 - Prob. 8PCh. 10 - Prob. 9PCh. 10 - Prob. 10P
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- in a loanable funds model the economy is at its longrun equilibrium and suddenly there is a rise in real GDP. a. supply of loanable funds - shift left, shifts right, no shift b. real interest rate- increase, no change, decrease c. public saving- no change, increaes, increase d. investment- decrease, increase, no changearrow_forwardWhy, other things remaining the same, does a rise in the real interest rate decrease the quantity of loanable funds demanded? The quantity of loanable funds demanded decreases because at a higher interest rate _______. A. fewer projects have an expected rate of profit below the real interest rate B. more projects have an expected rate of profit that exceeds the real interest rate C. banks want to lend more D. fewer projects have an expected rate of profit that exceeds the real interest ratearrow_forwardMarginal propensity to save is: A total saving divided by total income. B the change in total saving divided by the change in total income. C total saving when total income is zero. D total saving that is based on expected future income.arrow_forward
- Financial institutions have warned that increased life expectancy means that many people have not saved enough for their retirement. If true, what will the consumption path of these people look like as they reach their retirement years? Will this consumption path be smooth? And how will an increase in investment demand change the equilibrium interest and quantity of savings? Use a graph for the loanable funds market.arrow_forwardIn the graph you've just made, what happens if the real interest rate is 4 percent per year? A. The real interest rate rises to 8 percent per year, where there is a surplus of loanable funds. B. The real interest rate fluctuates between 4 and 8 percent per year. C. The real interest rate remains at 4 percent per year. D. There is a shortage of loanable funds and the real interest rate rises to 6 percent per year. Use screenshot attached below to answer the question thanks!arrow_forwardSuppose the government must increase taxes in order to increase spending. Now assume Congress wants to increase spending on education without decreasing spending somewhere else. For each variable state if it will INCREASE, DECREASE or REMAIN UNCHANGED. In at least one complete sentence state WHY this change will occur. Be specific. Private Saving (Sp): Consumption: (C) Government Saving (Sg) Total Saving: (S) Real Interest Rates: (r) Investment: (I)arrow_forward
- Suppose a government decides to pass a tax cut, while keeping the level of government spending the same. How can the government finance the tax cut? What is the impact of the tax cut on public saving? Will private saving be affected and, if so, how? If households save most of (but not all) the tax cut, how will this affect investment? How will this affect the equilibrium interest rate? and why?arrow_forwardTo promote long-run growth, the primary economic function of the financial system is to: Group of answer choices keep interest rates low. provide expert advice to savers and investors. match one person’s consumption expenditures with another person’s capital expenditures. match one person’s saving with another person’s investment.arrow_forwardIf saving dropped sharply in the economy, what would likely happen to investment? Why?arrow_forward
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