EBK FOUNDATIONS OF ECONOMICS
8th Edition
ISBN: 8220103632225
Author: PARKIN
Publisher: PEARSON
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Question
Chapter 26, Problem 5IAPA
To determine
To explain:
The effect of the increase in wealth on the equilibrium real interest rate, investment and saving.
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Explain the difference between saving and investment as defined by a macroeconomist. Which of the following situations represent investment and which represent saving? Explain.a. Your family takes out a mortgage and buys a new house.You use your $200 paycheck to buy stock in Africel.Your roommate earns $100 and deposits it in his account at a bank.You borrow $1,000 from a bank to buy a car to use in your pizza delivery business.The interest rate is 7 percent. Use the concept of present value to compare $200 to be received in 10 years and $300 to be received in 20 years.A company has an investment project that would cost $10 million today and yield a payoff of $15 million in 4 years.Should the firm undertake the project if the interest rate is 11 percent? 10 percent? 9 percent? 8 percent?Can you figure out the exact cutoff for the interest rate between profitability and nonprofitability?
Financial markets, Saving and Investment (chapter 13)
Questions ---Explain how a consumption tax could lead to a decrease in real interest rates.
Note Please Highly Requesting Do not Copy Paste Questions From Chegg, Or Courhero ..Last Time Questyions Line By Line Copy From Chegg. I Have Chegg, Coursehero
Chapter 26 Solutions
EBK FOUNDATIONS OF ECONOMICS
Ch. 26 - Prob. 1SPPACh. 26 - Prob. 2SPPACh. 26 - Prob. 3SPPACh. 26 - Prob. 4SPPACh. 26 - Prob. 5SPPACh. 26 - Prob. 6SPPACh. 26 - Prob. 7SPPACh. 26 - Prob. 8SPPACh. 26 - Prob. 9SPPACh. 26 - Prob. 1IAPA
Ch. 26 - Prob. 2IAPACh. 26 - Prob. 3IAPACh. 26 - Prob. 4IAPACh. 26 - Prob. 5IAPACh. 26 - Prob. 6IAPACh. 26 - Prob. 7IAPACh. 26 - Prob. 8IAPACh. 26 - Prob. 9IAPACh. 26 - Prob. 10IAPACh. 26 - Prob. 1MCQCh. 26 - Prob. 2MCQCh. 26 - Prob. 3MCQCh. 26 - Prob. 4MCQCh. 26 - Prob. 5MCQCh. 26 - Prob. 6MCQCh. 26 - Prob. 7MCQCh. 26 - Prob. 8MCQ
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- consider an economy described as follows: Y= C + |+ G. Y = 8,000 G = 2,500 T = 2,000 C = 1000+ 2/3 ( Y - T ) | = 1,200 - 100r in this economy, compute private saving, public saving, national saving. find the equilibrium interest rate.arrow_forwardAn economy has government purchases of 2000 (G=2,000). Desired national saving and desired investment are given by Sd = 200 + 500Or + (0.1Y) - (0.2G) Id = 1000 - 4000r When the full-employment level of output equals 5000, A. What is the equilibrium real interest rate? B. What is the equilibrium level of desired Investment? c. What is the equilibrium level of consumption?arrow_forward] In the loanable funds market model, assuming everything else is constant, which curve (supply of funds or demand for funds) is affected if there is an increase in national saving? How will equilibrium real interest rate and equilibrium quantity of loans change?arrow_forward
- Long run real interest rates are expected to increase. How will an accountant and economist view the effect of the increase. Does the difference in the viewpoints matter?arrow_forwardThe government of Old Flanders is planning to borrow heavily to finance spending on scientific research and development, education and defence. Use the supply and demand model (and a diagram) for saving and investment to explain the likely effects of this scheme on national saving, investment and the real interest rate in New Holland when its economy is closed. Explain the effectsarrow_forwardSuppose that the government provides tax cuts for those who invest in new capital. Illustrate and explain how this increase in government spending affects investment and the real interest rate in equilibrium. Show a graph and explanation.arrow_forward
- 2. Suppose Economist in England, a closed economy, have collected the following information about the economy for a particular year: GDP equals 10.000 Consumption equals 6.000 Tax revenue equals 1.500 Government purchases equals 1.700 The economist 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 equilibrum interest rate.arrow_forwardConsider an the following equations: Y=C + I +G Y=7,000 G=4000 T=2,000 C=150+0.75(Y-T) I=1,000-50r a. compute private saving, public saving and national saving. b. Calculate the equilibrium interest rate. c. Now suppose the G rises BY 1,000. Compute private saving, public saving, and national saving.arrow_forwardConsider following equations: Y=C + I +G Y=7,000 G=4000 T=2,000 C=150+0.75(Y-T) I=1,000-50r Now suppose the G rises BY 1,000. Compute private saving, public saving, and national saving. Calculate the new equilibrium interest rate.arrow_forward
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