EBK ECONOMICS: PRINCIPLES AND POLICY
13th Edition
ISBN: 9780100605930
Author: Blinder
Publisher: YUZU
expand_more
expand_more
format_list_bulleted
Question
Chapter 25, Problem 7DQ
To determine
The impact of saving incentives on consumption function.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
If saving dropped sharply in the economy, what would likely happen to investment? Why?
US Real GDP fell by 9 percent during the 2nd quarter of 2020. Real investment spending fell by 16.9 percent during Q2 of 2020, and investment spending makes up about 20 percent of GDP. How much did the decline in investment spending contribute to the decline in real GDP in the US during Q2 of 2020?
The interest rate effect states that a lower price level reduces the amount of money people wish to hold. When they lend out their excess savings, the interest rate falls. How does this affect investment spending?
Chapter 25 Solutions
EBK ECONOMICS: PRINCIPLES AND POLICY
Knowledge Booster
Similar questions
- Economists in Funlandia, a closed economy, have collected the following information about the economy for a particular year: Y = 10,000; C = 6,000; T = 1,500; G = 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 saving, public saving, national saving, investment, and the equilibrium real interest ratearrow_forwardThe consumption and saving functions in the Keynesian model Suppose we observe that a person's disposable income (DI) is 50,000 in 2019 and 63,000 in 2020. Suppose we observe that this person's consumption (C) is 47,000 in 2019 and 58,700 in 2020. Assume that this person's consumption obeys the Keynesian consumption function, so that C = A + MPC*DI. Finally, assume that A and MPC are unchanged between 2019 and 2020. (a) Calculate the values of A and MPC for this consumer, and graph the consumption function. (Hint: subtract the C function in 2019 from the C function of 2020). (b) In general, saving is given by the formula S = DI - C. Calculate this person's saving in 2019 and 2020. Assuming that this person's wealth (net worth) on January 1, 2019 was 80,000, what is their wealth on January 1, 2020? on January 1, 2021? (c) In general, if consumption is given by the function C = A + MPC*DI, then saving will obey the saving function S = -A + (1 - MPC)*DI. Plot the saving function…arrow_forwardEconomists in Funlandia, a closed economy, have collected the following information about the economy for a particular year: Y = 10,000 C = 6,000 T = 1,500 G = 1,700 The economists also estimate that the investment function is: I = 3,300 – 100 r, Where r is the country’s real interest rate, expressed as a percentage. Calculate private saving, public saving, national saving, investment, and the equilibrium real interest rate.arrow_forward
- Economists often argue that a large increase in government purchases – such as for the military – will crowd out private-sector spending. Use the investment-saving diagram to defend or to refute their premise.arrow_forwardEconomists 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_forwardIf there is an increase in the personal income tax rate, and people do not receive a pay increase, then disposable income will... decrease or increase Therefore, we can expect consumption spending to... decrease or increase and private saving to..... increase or decrease .arrow_forward
- Explain and compare the following terms: Saving intensity and break-even investment intensity.arrow_forwardWhy is investment spending unstable?arrow_forwardExplain what the consumption function shows, and describe what is held constant along the consumption function. Describe what happens when firms and workers underestimate future prices in the economy. Focus your answer on what would happen to actual output as opposed to the expected potential output.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Economics (MindTap Course List)EconomicsISBN:9781337617383Author:Roger A. ArnoldPublisher:Cengage Learning
Exploring EconomicsEconomicsISBN:9781544336329Author:Robert L. SextonPublisher:SAGE Publications, Inc
Economics (MindTap Course List)
Economics
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Cengage Learning
Exploring Economics
Economics
ISBN:9781544336329
Author:Robert L. Sexton
Publisher:SAGE Publications, Inc