Macroeconomics (Fourth Edition)
4th Edition
ISBN: 9780393603767
Author: Charles I. Jones
Publisher: W. W. Norton & Company
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Chapter 17, Problem 3E
(a)
To determine
The user cost of capital in the given economy, if the corporate income tax increases from 10 percent to 20 and 30 percent.
(b)
To determine
The effect of an increase in the corporate tax on the steady-state investment of an economy.
(c)
To determine
The relationship between the corporate income tax and the steady-state investment of an economy.
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Refer to the information provided in Table 8.9 below to answer the questions that follow. Table 8.9 All Figures in Billions of Dollars Aggregate Output Aggregate Consumption Planned Investment 160 20 200 240 20 300 20 400 400 20 500 20 100 320 480 Refer to Table 8.9. Planned saving equals planned investment at an aggregate output level of Select one: a. $500 billion. b. $400 billion. c. $200 billion. d. $300 billion
True or False...
When savings equals investment, reducing savings and increasing consumption is especially effective in stimulating output.
National Income: Where It Comes From and Where It Goes — End of Chapter Problem
If consumption depends on the interest rate, saving will also depend on it. In particular, the higher the interest rate, the greater will be the return to saving. Hence, the supply of loanable funds will be represented by an upward-sloping, rather than a vertical, curve.
National saving is the sum of public saving and private saving. Investment in this analysis is private investment. It does not include public investment.
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Macroeconomics (Fourth Edition)
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- Economics Gross Domestic Product Consumption 100 100 200 160 300 220 400 280 500 340 600 440 Expected Rate of Return Amount of Investment 15% $0 12 40 9 80 6 120 3 160 0 200 Please answer the next 4 questions based on the data in the table above. Also, r = 12%, G = 120, and net exports = 0. 11. The multiplier is equal to ________. 12. Equilibrium GDP = ______. 13. If r increases to 15%, ceteris paribus then equilibrium GDP is now equal to _______. 14. The MPC is equal to _______.arrow_forwardInvestment can be a form of: a. induced or autonomous b.private investment or public investment c. All of the abovearrow_forwardExplain and compare the following terms: Saving intensity and break-even investment intensity.arrow_forward
- Ifthe government collects more in tax revenue than it spends, and households consume more than they get in after-tax income,then a.private and public saving are both positive. b.private and public saving are both negative. c.privatesaving is positive,but public saving is negative. d.private saving is negative,but public saving is positive.arrow_forwardexplain whether the given statement is true, false or uncertain. Then provide arguments to justify your selection. The saving rate (gross domestic saving as a % of GDP) in Singapore, a small open economy, was 48% in 2017 while the investment rate (domestic investment as a % of GDP) was 25%. As a result, there was net outflow of capital from Singapore in 2017.arrow_forwardW=technology and r is standard share parameter of Cobb-Douglas production. Y = W . K^r . L^1-r a. Find steady-state level of capital per effective labor: k* b. Draw a graph and show output function, actual investment and breakeven investment lines. c. Assume that in this economy, people start spending more and therefore marginal propensity to save decline permanently. What will happen to variables in the model (steady-state level capital per effective labor; output growth etc.). d. Instead of reduction in saving assume this time that we face lower fertility rate in the country. What will happen to variables in the model (steady-state level capital per effective labor; output growth etc.).arrow_forward
- Suppose in a closed economy with positive national saving, consumption is 70% of GDP, taxes net of transfers are 30% of total consumption and investment, and government spending is less than investment. Which of the following statements is true? (a) Public saving is greater than private saving. (b) Private saving is 9% of GDP. (c) Public saving is less than 10% of GDP. (d) Investment is less than 10 Also give Why other False.arrow_forward16 True or False? The key difference between the Solow and production/expenditure models of the economy is that the Solow model endogenizes the saving rate.arrow_forwardSuppose the government passed a tax reform giving an investment tax credit to any firmbuilding a new factory or buying a new piece of equipment, please demonstratearrow_forward
- True/False and Explain If the real rate of return on investment is higher in the US than in Canada, capital will tend to flow out of the US and into Canada.arrow_forwardRefer to the graph above for a private closed economy. At the equilibrium level of GDP, saving will be: Select one: a. $50 billion b. $100 billion c. $150 billion d. Cannot be determined from the information givenarrow_forwardY=W.Kr.L1-r W=technology and r is standard share parameter of Cobb-Douglas production. b. Draw a graph and show output function, actual investment and breakeven investment lines. c. Assume that in this economy, people start spending more and therefore marginal propensity to save decline permanently. What will happen to variables in the model (steady-state level capital per effective labor; output growth etc.). d. Instead of reduction in saving assume this time that we face lower fertility rate in the country. What will happen to variables in the model (steady-state level capital per effective labor; output growth etc.).arrow_forward
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