PRINCIPLES OF MACROECONOMICS(LOOSELEAF)
7th Edition
ISBN: 9781260110920
Author: Frank
Publisher: MCG
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Chapter 9, Problem 4RQ
To determine
Determine whether a low household saving is a problem for the U.S economy or not.
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Using the demand and supply of loanable funds, demonstrate the effect of the following on the interest rate. As a result, what would you expect to be the impact of the change on growth? (LO9-3)
a-Government increases spending.
b-Businesses become more productive.
c-The people as a whole save more.
The government of a small island country is concerned about a few things and has hired you as an economic consultant to do some economic analysis for 2020. First, the government is worried that the inflation rate in the country is too high. This could reduce the purchasing power and the standards of living of the residents. Second, it suspects that the residents are importing too much goods and services from foreign countries. This could result in unemployment in the island. Third, and finally, it fears that the entrepreneurs are making too much profit and this could lead to unrest in the country.
The government has been able to calculate the following statistics (converted to dollars), which you will use to carry out your assignment. All the data pertain to 2020. All the numbers except for real GDP are in nominal terms. The base year in this country for the calculation of real GDP is 2019.
The government of a small island country is concerned about a few things and has hired you as an economic consultant to do some economic analysis for 2020. First, the government is worried that the inflation rate in the country is too high. This could reduce the purchasing power and the standards of living of the residents. Second, it suspects that the residents are importing too much goods and services from foreign countries. This could result in unemployment in the island. Third, and finally, it fears that the entrepreneurs are making too much profit and this could lead to unrest in the country.
The government has been able to calculate the following statistics (converted to dollars), which you will use to carry out your assignment. All the data pertain to 2020. All the numbers except for real GDP are in nominal terms. The base year in this country for the calculation of real GDP is 2019.
GDP Information:
Nominal GDP = $106,000,000
Real GDP = $100,000,000
Expenditures:
Consumption =…
Chapter 9 Solutions
PRINCIPLES OF MACROECONOMICS(LOOSELEAF)
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- Figure 26-5. Figure 26-5 shows the loanable funds market for a closed economy. Interest Rate 7% 6% 5% D S $75 $100 $125 Loanable Funds Refer to Figure 26-5. Starting at point A, a reduction in government spending would cause a) the quantity of loanable funds traded to increase to $125 and the interest rate to fall to 5% (point D). b) the quantity of loanable funds traded to decrease to $75 and the interest rate to rise to 7% (point E). c) the quantity of loanable funds traded to increase to $125 and the interest rate to rise to 7% (point C).arrow_forwardThe table given below shows an economy's demand for loanable funds and supply of loanable funds schedules when the government's budget is balanced. Real Interest rate (% per year) Loanable fund demanded Loanable fund supplied (Trillian of 2002 $) (Trillian of 2002 $) 8.5 5.5 8.0 6.0 75 6.5 7.0 7.0 6.5 7.0 9. 6.0 8.0 10 5.5 8.5 a. If the government has a budget surplus of $1 trillion, what are the real interest rate, the quantity of investment, and the quantity of private saving? Is there any crowding out in this situation? b. If the government has a budget deficit of $1 trillion, what are the real interest rate, the quantity of investment, and the quantity of private saving? is there any crowding out in this situation? c. If the government has a budget deficit of $1 trillion and the Ricardo-Barro effect occurs, what are the real interest rate and the quantity of investment?arrow_forwardIn the tiny country of Tuvalu the economy is sustained by the production of small fishing boats made from local materials, tuna, and copra (from coconuts). Last year Tuvalu produced 800 boats at a cost of $2,000 each but only 500 were sold due to recession at a price of $3,200 each. They produced $5 million worth of copra from their coconuts and consumed $2 million of it locally. The rest was used in the production of coconut oil cream which was exported for a value of $10 million. Based on this information, what was Tuvalu’s GDP for last year? The GNP of a country is $200 billion, receipts of factor income from the rest of the world are $10 billion, payments of factor income to the rest of the world are $30 billion, and depreciation is $25 billion. What is the GDP and the Net National Product? Schneider’s Bicycles produced $860,000 worth of custom-made of custom-made bicycles last year and paid $45,000 in taxes. Schneider used $315,000 in parts to assemble the…arrow_forward
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