Fiscal policy and investment. Read Focus Box Deficit Reduction: Good or Bad for Investment? In each...

  

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Fiscal policy and investment. Read Focus Box "Deficit Reduction: Good or Bad for Investment?" In each case below, there is a fiscal consolidation. Remember that equilibrium condition in good markets can also be written I = S + (T – G) a. How does this fiscal consolidation increase public saving? Calculate the change in public saving and the change in pri- vate saving? What must happen to the target interest rate for this policy to describe the changes in parts a, b, and c? Year Y G T S Pre-policy 1000 500 200 300 200 Post-policy 950 400 300 250 250 b. Year Y C G S Pre-policy 1000 500 200 300 200 Post-policy 900 450 250 200 200 с. Year Y G т Pre-policy 1000 500 200 300 200 Post-policy 975 480 195 300 300 Fiscal policy and investment. Read Focus Box "Deficit Reduction: Good or Bad for Investment?" In each case below, there is a fiscal consolidation. Remember that equilibrium condition in good markets can also be written I = S + (T – G) a. How does this fiscal consolidation increase public saving? Calculate the change in public saving and the change in pri- vate saving? What must happen to the target interest rate for this policy to describe the changes in parts a, b, and c? Year Y G T S Pre-policy 1000 500 200 300 200 Post-policy 950 400 300 250 250 b. Year Y C G S Pre-policy 1000 500 200 300 200 Post-policy 900 450 250 200 200 с. Year Y G т Pre-policy 1000 500 200 300 200 Post-policy 975 480 195 300 300

Answer rating: 100% (QA)

a Public saving Prepolicy TG 300200 100 3D Postpolicy 250250 0 Private saving Prepolicy YTC 10002005... View the full answer