EBK MACROECONOMICS
10th Edition
ISBN: 9780134896571
Author: CROUSHORE
Publisher: VST
expand_more
expand_more
format_list_bulleted
Question
Chapter 13, Problem 4AP
a)
To determine
To know: The effect of supply shock on country’s net exports.
b)
To determine
To know: The effect on net exports when there is temporary increase in money supply.
c)
To determine
To check: Whether prediction made is confirmed or contradicted about spending behavior.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Suppose the U.S. has an investment opportunity which costs $200 which will increase output from 100
to 110 per quarter. The investment would take effect after t = 0. What is the marginal product of
capital (MPK)? What is the difference in the present value of future income in the U.S. of undertaking
the investment if the real world interest rate is 8%? Should the U.S. borrow from abroad to fund the
investment and why?
TYPO*. Increased output from 100 to 110 per YEAR
(not quarter).
Consider a closed economy.
Consider the effects of an increase of LFD in the
loanable funds market.
In terms of the absolute value, its SRGE effects on y*
is
its LRGE effects on y*.
Here it = an increase of LFD in the loanable funds
market.
Hint:
You need to read the lecture notes of 4:3 General
Equilibrium Effects - Notes.pdf
either larger than, or small than, or the same as
O larger than
smaller than
the same as
In the classical model with a closed economy, if the interest rate is too low, then investment is too
compared to savings; as a result, the interest rate will
high; rise
high; fall
low; rise
O low; fall
Knowledge Booster
Similar questions
- Sunshine is a small open economy described by the following long-run classical equations where Y is the economy's real GDP, T-taxes, G-government spending, NX-net exports, l-investment, C-consumption, r-domestic interest rates, r* - world interest rates. Y = 4000 G = 1250 T = 1000 C = 250 + 2/3 (Y-T) I = 450 - 25r NX = 1250 - 175epsilon r =r^ * =4 a) Required: Select the appropriate answer that represent [i] investment, [ii] national savings, [iii] equilibrium exchange rate and [iv] trade balance. b) Suppose the government of sunshine cut its spending to 2,000. Required: Select the appropriate answer that represent [i] investment, [ii] national savings, [iii] equilibrium exchange rate and [iv] trade balance. c) Now suppose the world interest rate falls from 8 to 3 percent, (G is again 2000). Required: Select the appropriate answer that represent [i] private savings, [ii] public savings, [ii] national savings, [iv] investment, [v] trade balance and [vi]…arrow_forwardConsider a country whose economic structure matches the assumptions of the classical model. After reading a recent best-seller documenting a growing population of low-income elderly people who were ill prepared for retirement, most residents of this country decide to increase their saving at any given interest rate. Explain whether or how this could affect the following: a. The current equilibrium interest rate b. Current equilibrium real GDP c. Current equilibrium employment d. Current equilibrium investment e. Future equilibrium real GDParrow_forwardSunshine is a small open economy described by the following long run classical equation where Y is the economic real GPD,T-taxes,G-government spending,NX-net exports,I- investment, C-consumption r-domestic interest rates, r*world interest rates. Y=8000 G=2500 T=200 C=500+2/3(Y-T) I=900-50r NX=1500-250£ r=r*=8 a) find the trade balance, investment, national savings and the equilibrium exchange rate. b) the government of sunshine cut its spending to 2000.compute the investment,trade balance, national savings and the equilibrium exchange rate. C) now suppose the world interest rates falls from 8-3 per cent (G is again 2000 ).compute private savings public savings, national savings,investmentents,trade balance and the equilibrium exchange rate..arrow_forward
- Economists in Funlandia, which has a closed economy, have collected the following information about the economy for a particular year: Y = 11,500 C = 7,000 T = 1,300 G = 1,900 The economists also estimate that the investment function is: I 3,200 - 100r where r is the country's real interest rate, expressed as a percentage. Complete the following table by calculating private saving, public saving, national saving, investment, and the equilibrium real interest rate. Component Private Saving Public Saving National Saving Investment Equilibrium Real Interest Rate Amountarrow_forwardUse the classical general equilibrium model WITH INVESTMENT and GRAPHICAL ANALYSIS to discuss the effects on the LEVELS of consumption, investment, GDP, the interest and the price level at time t of (a) A permanent DECREASE in the level of productivity (that is, a decrease in At and At+1) (b) A temporary DECREASE in the level of productivity (that is, a decrease in A; but not in A-1) (c) An ANTICIPATED DECREASE in the level of productivity (that is, a decrease in Ag+1 but not in A:)arrow_forwardEconomists in Pakland, a closed economy, have collected the following information about the economy for a particular year: Y = Rs.10,500 C = Rs.6,000 T = Rs.1,500 G = Rs.1,700 The economists also estimate that the investment function is: I = 3,300 - 100r Where, r is the country’s real interest rate, expressed as a percentage. Calculate: Private savingBlank 1(Write Only numbers in the blank. Do not write plus signs, minus signs, commas, full stops, currency etc.)Public savingBlank 2(Write Only numbers in the blank. Do not write plus signs, minus signs, commas, full stops, currency etc.)National savingBlank 3(Write Only numbers in the blank. Do not write plus signs, minus signs, commas, full stops, currency etc.)InvestmentBlank 4The equilibrium real interest rateBlank 5(Write Only numbers in the blank. Do not write plus signs, minus signs, commas, full stops, currency etc.)If the government increases taxes to Rs.1,800, calculate private savingBlank 6((Write Only numbers in the…arrow_forward
- Suppose the U.S. has an investment opportunity which costs $200 which will increase output from 100 to 110 per quarter. The investment would take effect after t = 0. What is the marginal product of capital (MPK)? What is the difference in the present value of future income in the U.S. of undertaking the investment if the real world interest rate is 8%? Should the U.S. borrow from abroad to fund the investment and why?arrow_forwardEconomists from Funlandia have collected the following information about the economy (all measured in billions of bucks): Y = 12, C= 9, T = 2, and G = 2.5. The economists also estimate the investment function is I = 2 – 0.5r where r is the country’s real interest rate expressed as a percentage. Calculate private saving, public saving, national saving, investment, and the real interest rate.arrow_forwardSuppose that Marvel Kingdom economy is characterized by the following equations. Aggregate consumption: C = 100 + 0.75Y, Investment: I = 500– 5r Government spending on goods and services: G = 200 Lump-sum tax: Net Export: T = 300 NX = 200 Interest rate: : r = 5% Yp is disposable income, Y is real output, while r is interest rate (in percentage). Yp, Y, C, I, G, T, and NX are in trillions Marvel Dollar (MD) Solve for the initial equilibrium output (Y,) and find the economic multiplier. If the government aims for a target output level (Y,) of MD 3500 trillion, how much will output increase and how much should the government set its spending to achieve the targeted output level?arrow_forward
- Per the classical economists, if the quantity of money that people wanted to save was greater than the amount that people wanted to invest, the interest rate would fall. True or Falsearrow_forwardRead Kiyotaki (1998). Consider the model in section 2 of the paper. Suppose there is no borrowing constraint (i.e., assume is arbitrarily large). Also assume that a = 1.2, B=0.9, y = 1.05, 8 = 0.1, and n = 4. (The notations of variables and parameters follow Kiyotaki (1998). Just in case, & denotes the lower case of Delta in the Greek alphabet.) Reference: Kiyotaki, N. (1998). "Credit and Business Cycles." The Japanese Economic Review, volume 49, issue 1, (You can obtain a free electronic copy of this article through the university library's website. If you do not know how, please ask the librarians.) Answer the following questions. pages 18-35.arrow_forwardI have to analyze, using the IS-LM model, the macroeconomiceffects of an increase in savings in the short term and its implications for long-term growth. Specifically, I have to suppose that households (consumers) lose confidence and start saving more for any level of disposable income. Can you please answer the following question (using graphs too): Using the IS-LM model, show the effect of an increase in saving on production,investment and consumption, assuming that the Central Bank modifies the money supply when income changes, so that the LM curve is flatarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Principles of Economics (12th Edition)EconomicsISBN:9780134078779Author:Karl E. Case, Ray C. Fair, Sharon E. OsterPublisher:PEARSON
Engineering Economy (17th Edition)EconomicsISBN:9780134870069Author:William G. Sullivan, Elin M. Wicks, C. Patrick KoellingPublisher:PEARSON
Principles of Economics (MindTap Course List)EconomicsISBN:9781305585126Author:N. Gregory MankiwPublisher:Cengage Learning
Managerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-...EconomicsISBN:9781259290619Author:Michael Baye, Jeff PrincePublisher:McGraw-Hill Education
Principles of Economics (12th Edition)
Economics
ISBN:9780134078779
Author:Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:9780134870069
Author:William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-...
Economics
ISBN:9781259290619
Author:Michael Baye, Jeff Prince
Publisher:McGraw-Hill Education