Suppose that the government increases taxes and government purchases by equal amounts. What happens to the interest rate and investment in response to this balanced-budget change? Explain how your answer depends on the marginal propensity to consume.

When the government subsidizes investment, such as with an investment tax credit, the subsidy often applies to only some types of investment. This question asks you to consider the effect of such a change. Suppose there are two types of investment in the economy: business investment and residential investment. The interest rate adjusts to equilibrate national saving and total investment, which is the sum of business investment and residential investment. Now suppose that the government institutes an investment tax credit only for business investment.

Draw the economy's supply and demand curves for loanable funds. How does this policy affect the supply and demand for loanable funds? What happens to the equilibrium interest rate?

Suppose that an increase in consumer confidence raises consumers' expectations about their future income and thus increases the amount they want to consume today. This might be interpreted as an upward shift in the consumption function. How does this shift affect investment and the interest rate?

According to the IS-LM model, what happens in the short run to the interest rate, income, consumption, and investment under the following circumstances? Be sure your answer includes an appropriate graph.

The central bank increases the money supply.

Consider an economy described as follows:

$$\begin{array}{l}{Y=C+I+G.} \\ {Y=8,000.} \\ {G=2,500.} \\ {T=2,000.} \\ {C=1,000+2 / 3(Y-T).} \\ {I=1,200-100 r.}\end{array}$$

In this economy, compute private saving, public saving, and national saving.

The government raises taxes by $100 billion. If the marginal propensity to consume is 0.6, what happens to the following? Do they rise or fall? By what amounts?

National saving,

Suppose that consumption depends on the interest rate. How, if at all, does this alert the conclusions reached about the impact of an increase in government purchases on investment, consumption, national saving, and the interest rate?

Consider an economy that produces and consumes hot dogs and hamburgers. In the following table are data for two different years.

a. Using $2010$ as the base year, compute the following statistics for each year: nominal GDP, real GDP, the implicit price deflator for GDP, and the CPI. b. By what percentage did prices rise between $2010$ and $2018$? Give the answer for each good and also for the two measures of the overall price level. Compute the answers given by the Laspeyres and Paasche price indexes. Explain the difference.

An economy has 100 people divided among the following groups: 25 have full-time jobs, 20 have one part-job, 5 have two part-time jobs, 10 would like to work and are looking for jobs, 10 would like to work but are so discouraged the have given up looking, 10 are running their own businesses, 10 are retired, and 10 are small children.

Calculate the labor force and the labor-force participation rate.

The government raises taxes by $100 billion. If the marginal propensity to consume is 0.6, what happens to the following? Do they rise or fall? By what amounts?

Private saving,

Look at the UML diagram in Figure 6-17 and answer the following questions:

a) What is the name of the class?

b) What are the fields?

c) What are the methods?

d) What are the private members?

e) What are the public members?

Suppose that Congress is considering an investment tax credit, which subsidizes domestic investment.

a. How does this policy affect national saving, domestic investment, net capital outflow, the interest rate, the exchange rate, and the trade balance?

Mr. Dodd filled the gas tank on his lawn mower with 3.8 gallons of gas. He mowed his yard 10 times on the same tank of gas. He used the same amount of gas each time. How much gas did he use each time?

When the government subsidizes investment, such as with an investment tax credit, the subsidy often applies to only some types of investment. This question asks you to consider the effect of such a change. Suppose there are two types of investment in the economy: business investment and residential investment. The interest rate adjusts to equilibrate national saving and total investment, which is the sum of business investment and residential investment. Now suppose that the government institutes an investment tax credit only for business investment.

Compare the old and the new equilibria. How does this policy affect the total quantity of investment? The quantity of business investment? The quantity of residential investment?