Question

1. Using a supply and demand diagram, show the effect of the following policies on the...

1. Using a supply and demand diagram, show the effect of the following policies on the real interest rate and the amount of investment in the economy. show work.

a) the introduction of an investment tax credit

b) Government spending falls

c)Taxes increase

d) New policies make it more attractive for households to save

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

a) Demand for investment will shift out.
hence, interest rate and investment level will rise.


b) Fall in government spending will increase national saving. Supply curve will shift out. Interest rate will fall and investment level will rise.


c) Increase in tax rate has dual effect. First, it increases public saving. Secondly, it reduces private saving.
Assume, increase in public saving is lower than reduction in private saving. Then, supply curve will shift in. Interest rate will rise and investment will fall.


d) Supply will shift out. Interest rate will fall and investment will rise.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
1. The Federal Reserve sets _____ policy, while the president and Congress set _____ policy. These...
1. The Federal Reserve sets _____ policy, while the president and Congress set _____ policy. These two policies influence aggregate _____.   2. The wealth-effect notes that a _____ price level increases the real value of households’ wealth. The larger real wealth _____ the quantity of goods and services demanded.   3. Last year, total income increased $1,000 and consumption increased $800. An increase in government spending equal to $10 would cause output to increase by $_____ because the multiplier is ______.  ...
Show on graph (using the aggregate demand and aggregate supply model) the effects of: An expansionary...
Show on graph (using the aggregate demand and aggregate supply model) the effects of: An expansionary fiscal policy (reduction in taxes or increase in government spending) trying to stimulate the economy to get it out of the recession.
Using the construction of the supply-and-demand diagram, indicate the effect of the following events on the...
Using the construction of the supply-and-demand diagram, indicate the effect of the following events on the market for sweatshirts. Will the event cause an increase of decrease in market demand or market supply or an increase or decrease in quantity demanded or quantity supplied? a. The cost of cotton becomes cheaper. b. The price of leather jackets (substitute) increases. c. All colleges require students to exercise in the appropriate college sweatshirt. d. New machinery used in the knitting process becomes...
Both problems deal with Aggregate demand and Aggregate Supply Question1)Explain whether the following government policies affect...
Both problems deal with Aggregate demand and Aggregate Supply Question1)Explain whether the following government policies affect the aggregate demand curve or the short-run aggregate supply curve and how. 1. The government reduces the minimum nominal wage. 2.The government increases Temporary Assistance to Needy Families (TANF) payments, government transfers to families with dependent children. 3.To reduce the budget deficit, the government announces that households will pay much higher taxes beginning next year. 4.The government reduces military spending. Question 2) In Wageland,...
Explain whether the following government policies affect the aggregate demand curve or the short-run aggregate supply...
Explain whether the following government policies affect the aggregate demand curve or the short-run aggregate supply curve and how. The government reduces the minimum nominal wage. The government increases Temporary Assistance to Needy Families (TANF) payments, government transfers to families with dependent children. To reduce the budget deficit, the government announces that households will pay much higher taxes beginning next year. The government reduces military spending.
1.) Use a supply and demand diagram to show the effects of a binding government price...
1.) Use a supply and demand diagram to show the effects of a binding government price ceiling on beef. Label your diagram and explain. What effect will this policy have on the price of pork. explain.
Explain whether each of the following events would increase, decrease, or have no effect on the...
Explain whether each of the following events would increase, decrease, or have no effect on the short-run aggregate demand curve: a. A decrease in the U.S. price level makes American goods more attractive to foreign buyers. b. Households decide to consume a larger share of their income. c. Worsening profit expectations cause firms to decrease their expenditures on new machinery and equipment. d. As the price level declines, the purchasing power of currency increases, and thus Americans increase their purchases...
Explain whether the following government policies affect the aggregate demand curve or the short-run aggregate supply...
Explain whether the following government policies affect the aggregate demand curve or the short-run aggregate supply curve and how. 1.The government reduces the minimum nominal wage. 2.The government increases Temporary Assistance to Needy Families (TANF) payments, government transfers to families with dependent children. 3.To reduce the budget deficit, the government announces that households will pay much higher taxes beginning next year. 4.The government reduces military spending.
1. Examine the effects of government policies in the light of the demand supply framework. 2....
1. Examine the effects of government policies in the light of the demand supply framework. 2. Explain the meaning of the elasticity of demand and supply and apply the concept of elasticity to real-world problems. 3. Describe the concepts of consumer surplus and producer surplus and apply the concepts to study the efficiency of the market and the inefficiency of government taxation. 4. Define price floor and price ceiling in economics. 5. Use the model of demand and supply to...
1. Which of the following best describes the interest rate effect? Group of answer choices a...
1. Which of the following best describes the interest rate effect? Group of answer choices a decrease in the supply of money will increase interest rates and reduce interest-sensitive consumption and investment spending. an increase in the price level will increase the demand for money, reduce interest rates, and decrease consumption and investment spending. an increase in the price level will increase the demand for money, increase interest rates, and decrease consumption and investment spending. an increase in the price...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT