12 Questions
What happens to private savings if disposable income decreases by $200 billion in the economy described?
Private savings decreases by $120 billion.
If national savings increases by $80 billion in the economy described, what is the change in investment?
Investment increases by $40 billion.
How does an increase in government spending affect national savings in the economy described?
National savings decreases.
If the equilibrium interest rate in the economy described is 8%, what is the level of investment?
$850
What is the impact on private saving if consumption increases by $50 billion?
Private saving decreases by $50 billion.
If government spending is raised by $500 in the economy described, what happens to the equilibrium interest rate?
The equilibrium interest rate increases.
What happens to consumption when the government raises taxes by $100 billion?
Decreases due to a lower disposable income
How does private savings change when the government increases taxes by $100 billion?
Decreases due to lower disposable income
What happens to public savings when the government raises taxes by $100 billion?
It increases by the full amount of the tax increase
How does investment change when the government increases taxes by $100 billion?
Increases due to higher total savings and a lower interest rate
If the marginal propensity to consume is 0.6, what does this suggest about the impact of tax increases on private savings?
Private savings decrease less than public savings increase
Why does total savings increase when the government raises taxes by $100 billion?
Due to an increase in private savings
Explore how an increase in government taxes impacts consumption, investment, and the interest rate. Learn how changes in taxes affect disposable income, private and public savings, and ultimately influence total savings and the interest rate.
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