In a large open economy, how would each of the following events affect the equilibrium interest rate?
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In a large open economy, how would each of the following events affect the equilibrium interest rate?
a. A natural disaster causes extensive damage to homes, bridges, and highways, leading to increased investment spending to repair the damaged infrastructure.
b. Households and firms expect that the government will increase taxes on businesses in the future.
c. The World Cup soccer matches are being televised, and many people stay home to watch them rather than spending time shopping, thereby reducing consumption.
d. The government proposes a new tax on saving, based on the value of people’s investments as of December 31 each year.
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Related Book For
Money Banking And The Financial System
ISBN: 1801
3rd Edition
Authors: R. Glenn Hubbard, Anthony Patrick O'Brien
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