Use a saving-investment diagram to explain what happens to saving, investment, and the real interest rate in

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Use a saving-investment diagram to explain what happens to saving, investment, and the real interest rate in each of the following scenarios in a closed economy.

a. Current output rises due to a temporary productivity increase.

b. The tax code changes so that business firms face higher tax rates on their revenue (offset by other lump-sum tax changes so there's no overall change in tax revenue).

c. The government increases spending temporarily for a one-year project to turn mercury into gold.

d. The average educational level rises, inducing an increase in the future marginal productivity of capital.

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Macroeconomics

ISBN: 9780134167398

9th Edition

Authors: Andrew B. Abel, Ben Bernanke, Dean Croushore

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