Macroeconomics
13th Edition
ISBN: 9780134735696
Author: PARKIN, Michael
Publisher: Pearson,
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Chapter 24, Problem 10SPA
To determine
Identify the real interest rate and investment in the presence of Ricardo–Barro effect.
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Students have asked these similar questions
Investment can be increased both by reducing taxes on private saving and by reducing the government budget deficit.
True or False: It is possible to implement both of these policies at the same time because reducing taxes on private spending has the effect of
decreasing the government budget deficit.
True
False
What would you need to know in order to judge which of these two policies would be a more effective way to raise investment? Check all that apply.
The responsiveness of private saving to increases in investment
The response of private saving to changes in the government budget deficit
The elasticity of private saving with respect to the after-tax real interest rate
Suppose Indian government borrows 50,000/- more next year than this year.
Use a supply-and-demand diagram to analyze this policy. Does the interest rate rise or fall?
What happens to investment? To private saving? To public saving? To national saving? Compare the size of the changes to the 50,000/- of extra government borrowing.
EqUuil rate= 17% , borrowing by 171 million at old interest
rate 15%. compared to value 151 million
Question 2. Suppose initially the market for loanable funds is in equilibrium with I*-S*=300
million. Equilibrium interest rate is 1#%. Other things being the same, assume there is a rise in
government borrowing by $1#1 million. At the old interest rate (1#%), what would the amount of
national saving (S) equal to? What would happen to the interest rate value once the new
equilibrium is reached? (Will it change? How?) By how much, you would think that investment
(I), national saving, and private saving might change in the new equilibrium (compared to value
S1#1 million), and would it be an increase, decrease, or no change? [Use maximum five sentences
to clarify vour computations. Type vour answers strietly in the provided space before the next
Chapter 24 Solutions
Macroeconomics
Ch. 24.1 - Prob. 1RQCh. 24.1 - Prob. 2RQCh. 24.1 - Prob. 3RQCh. 24.1 - Prob. 4RQCh. 24.2 - Prob. 1RQCh. 24.2 - Prob. 2RQCh. 24.2 - Prob. 3RQCh. 24.2 - Prob. 4RQCh. 24.2 - Prob. 5RQCh. 24.3 - Prob. 1RQ
Ch. 24.3 - Prob. 2RQCh. 24.3 - Prob. 3RQCh. 24.3 - Prob. 4RQCh. 24.3 - Prob. 5RQCh. 24.3 - Prob. 6RQCh. 24.4 - Prob. 1RQCh. 24.4 - Prob. 2RQCh. 24.4 - Prob. 3RQCh. 24 - Prob. 1SPACh. 24 - Prob. 2SPACh. 24 - Prob. 3SPACh. 24 - Prob. 4SPACh. 24 - Prob. 5SPACh. 24 - Prob. 6SPACh. 24 - Prob. 7SPACh. 24 - Prob. 8SPACh. 24 - Prob. 9SPACh. 24 - Prob. 10SPACh. 24 - Prob. 11SPACh. 24 - Prob. 12SPACh. 24 - Prob. 13APACh. 24 - Prob. 14APACh. 24 - Prob. 15APACh. 24 - Prob. 16APACh. 24 - Prob. 17APACh. 24 - Prob. 18APACh. 24 - Prob. 19APACh. 24 - Prob. 20APACh. 24 - Prob. 21APACh. 24 - Prob. 22APACh. 24 - Prob. 23APACh. 24 - Prob. 24APACh. 24 - Prob. 25APACh. 24 - Prob. 26APACh. 24 - Prob. 27APACh. 24 - Prob. 28APACh. 24 - Prob. 29APACh. 24 - Prob. 30APA
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