PRINCIPLES OF MACROECONOMICS(LOOSELEAF)
7th Edition
ISBN: 9781260110920
Author: Frank
Publisher: MCG
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Chapter 9, Problem 6RQ
To determine
Determine the factors that increase the supply of saving and increase the demand for saving.
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Suppose that in the year 2015, Oceanaire, Inc. planned to produce 525,000 units of its lightweight scuba tanks. Of the
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Chapter 9 Solutions
PRINCIPLES OF MACROECONOMICS(LOOSELEAF)
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- The table given below shows an economy’s demand for loanable funds and the supply of loanable funds schedules when the government’s budget is balanced. Real Interest rate (% per year) Loanable fund demanded (Trillian of 2002 $) Loanable fund supplied (Trillian of 2002 $) 4 8.5 5.5 5 8 6 6 7.5 6.5 7 7 7 8 6.5 7 9 6 8 10 5.5 8.5 1. 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? 2. 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? 3. 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_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_forwardWhat Are Real Yields, and Why Do They Matter? Summary: Now that inflation has subsided somewhat, the market is experiencing favorable real rates. Positive real rates are good for savers, but potentially problematic for the equity markets. Real rates, the difference between on-the-run treasuries and inflation (most recently auctioned bond), in June 2022 was -6.16 (2.94 - 9.1). This meant that savers were earning a negative yield on their fixed- income investments. Today, real rates are the highest they have been since 2009. A welcome change especially for retirees living on a fixed income. However, that assumes that retirees have rotated their investments into fixed income. Since the rates on bonds were so low, retirees were forced to invest in riskier assets like common stock to get a return that kept up with inflation. As higher rates entice more and more investors to sell their riskier assets, those retirees who have not rotated their assets back into fixed income could lose…arrow_forward
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