Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Question 1 (16 marks) In a closed economy, if the national income is $5,000, consumption is $2,000, taxes are $800 and government purchases are $600.
Question 1 (16 marks) In a closed economy, if the national income is $5,000, consumption is $2,000, taxes are $800 and government purchases are $600. Assume the economy is in the long run. a. b. c. Calculate the amount of public saving. Show your workings. (2 marks) What is the level of private investment? Show your workings. (3 marks) Use a well-labeled loanable fund market diagram to show the effect of increasing business confidence on the market. Explain. (5 marks) Assume now consumption depends negatively on the interest rate, which case, c) or d) will result in a larger change in the equilibrium investment due to the increasing business confidence? Explain your answer in words. (6 marks)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started