MindTap Economics, 1 Term (6 Months) Printed Access Card for Mceachern's ECON MACRO, 6th
6th Edition
ISBN: 9781337915595
Author: William A. McEachern
Publisher: Cengage Learning
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Chapter 9, Problem 5P
To determine
Pattern of saving and spending for an individual according to life-cycle-hypothesis and its impact on the rate of savings in the economy.
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According to the life-cycle hypothesis, what is the typical pattern of saving and spending for an indi-vidual over his or her lifetime? What impact does this pattern have on the saving rate in the overall economy
Classify each of the following based on the macroeconomic definitions of saving and investment.
Discuss the overall purpose people have for investing. Define investment
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MindTap Economics, 1 Term (6 Months) Printed Access Card for Mceachern's ECON MACRO, 6th
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- Suppose the savings rate suddenly decreases. We can assume that real growth will _____ in the short-run and the steady-state of capital will _____ increase or decrease?arrow_forwardDescribe the four major sectors in an economy according to the macroeconomic point of view?arrow_forwardThere is evidence that people with more education make more money than those with less education. Use the life cycle model to explain whether these statements are true, false or uncertain. a) Well-educated people maintain higher levels of consumption and savings than less-educated people b) The saving rate of well-educated people is higher than the saving rate of less-educated people. c) In recessions consumption of well-educated people decreases more than consumption of less-educated people. Assume that credit market is imperfect and there are liquidity constraints. Explain your answers.arrow_forward
- Explain the difference between the stock variable and a flow variable in economics with one example of each.arrow_forwardDescribe the process of Calculating Present Value?arrow_forward3.3 Explain and show graphically how an increase in household saving affects the equilibrium interest rate and the equilibrium quantity of loanable funds. 3.4 Explain and show graphically how an increase in expected profits from firm investment projects affects the equilibrium interest rate and the equilibrium quantity of loanable funds. 3.5 Explain and show graphically how an increase in government spending (i.e. budget deficit) affects the equilibrium interest rate in the market for loanable funds.arrow_forward
- Which of the following situations represents investment? Saving? ExplainYour family takes out a mortgage and buys a new house. You use your paycheque to buy stock in Sagicor Financial Services.arrow_forwardA friend asks you to explain the difference between saving and investment. Explain the difference.arrow_forwardSuppose the people in a certain economy decide to stop saving and instead use all their income for consumption. They do nothing to add to their stock of human or physical capital. Discuss the prospects for growth of such an economy.arrow_forward
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