Question: When government spending and tax revenue DECREASE by the SAME amount in a closed economy, then which is true ? a) both the equilibrium real

When government spending and tax revenue DECREASE by the SAME amount in a closed economy, then

which is true ?

a) both the equilibrium real interest rate and the equilibrium level of investment will decrease

b) both the equilibrium real interest rate and the equilibrium level of investment will increase

c) the equilibrium real interest rate will decrease and the equilibrium level of investment will increase

d) the equilibrium real interest rate will increase and the equilibrium level of investment will decrease

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Economics Questions!

Q:

Let: C = consumption, Ip = investment spending (as a function of price level), G = government spending, Tx = tax revenue, Yd = after-tax income, Assume for a given closed economy: C=100 + 0.9 Yd -...

Q:

Let: C = consumption, Ip = investment spending (as a function of price level), G = government spending, Tx = tax revenue, Yd = after-tax income, Assume for a given closed economy: C=100 + 0.9 Yd -...

Q:

C = consumption, Ip = investment spending (as a function of price level), G = government spending, Tx = tax revenue, Yd = after-tax income, Assume for a given closed economy: C=100 + 0.9 Yd - 20P Ip=...

Q:

1. Begin with the Keynesian model in equilibrium. The American Recovery and Reinvestment Act resulted in reduced tax rates and increases in government spending. If tax rates decrease and government...

Q:

Q1. 1. Begin with the Keynesian model in equilibrium. The American Recovery and Reinvestment Act resulted in reduced tax rates and increases in government spending. If tax rates decrease and...

Q:

Kindly help me please Aadland - Spring 2013 Problem Solving / Essay Questions. (75 points) #11. (30 pts) Assume the monetary base (B) is $100 billion, the reserve-deposit ratio (rr) is 0.1, and the...

Q:

We use the following terminology in this part: aggregate income Y and disposable income Y d (= (1 t ) Y ), consumption function C ( Y d ), planned investment function I ( r ), government spending G ,...

Q:

1. Catagory Gender Number in millions Employed Male. 85 Employed Female 65 Unemployed Male 5 Unemployed Female 5 Not in the labour force Male 45 Not in the labour force. Female 35 The abovetable...

Q:

We use the following terminology in this part: aggregate income Y and disposable income Yd (= Y T), consumption function 001;), planned investment function I('r), government spending G, and taxatiOn...

Q:

We use the following terminology in this part: aggregate income Y and disposable income Yd (= Y T), consumption function C(Yd), planned investment function I(r), government spending G, and taxation T...

Q:

Identify and describe the accounting cycle and select one accounting process e.g Accounts Payable, Accounts Receivable, Payroll Inventory, that will be the basis of this.

Q:

3) Suppose that 62% of the employees at a company are male and that 35% of the employees just received merit raises. If 20% of the employees are male and received a merit raise, what is the...

Q:

Why should you monitor the value of your investments?

Q:

You will write a 1 - Page double spaced response, in total, to the posted opinion/reflection questions. (Do not provide a full page response for each question). 1. In your own words, explain what is...

Q:

1. To generate a discussion on the concept of roles

Q:

6. What information processes operate in communication situations?

Q:

3. How can we use information and communication to generate trust?