ch 25 study guide national savings = y-c-g = i6000 - 4000 – 1200 = 800 y – t – c 6000 – 1000...

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Ch 25 Study Guide National Savings = Y-C-G = I 6000 - 4000 – 1200 = 800 Y – T – C 6000 – 1000 – 4000 = 1000 T – G = - 200

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Page 1: Ch 25 Study Guide National Savings = Y-C-G = I6000 - 4000 – 1200 = 800 Y – T – C 6000 – 1000 – 4000 = 1000 T – G = - 200

Ch 25 Study Guide

National Savings = Y-C-G = I 6000 - 4000 – 1200 = 800

Y – T – C 6000 – 1000 – 4000 = 1000

T – G = - 200

Page 2: Ch 25 Study Guide National Savings = Y-C-G = I6000 - 4000 – 1200 = 800 Y – T – C 6000 – 1000 – 4000 = 1000 T – G = - 200

• d. Is the government’s budget policy contributing to growth in this country or harming it?

Harming it because…….

Supply of LF is shifting Left (reducing natl. savings)

Raising ( r ) and therefore decreasing I

You can not have growth without growth in Capital

Page 3: Ch 25 Study Guide National Savings = Y-C-G = I6000 - 4000 – 1200 = 800 Y – T – C 6000 – 1000 – 4000 = 1000 T – G = - 200

Real Int Rate Q of LF Supply Q of LF Demand

6 1300 700

5 1200 800

4 1000 1000

3 800 1200

2 600 1500

Page 4: Ch 25 Study Guide National Savings = Y-C-G = I6000 - 4000 – 1200 = 800 Y – T – C 6000 – 1000 – 4000 = 1000 T – G = - 200

4% $1,000

Page 5: Ch 25 Study Guide National Savings = Y-C-G = I6000 - 4000 – 1200 = 800 Y – T – C 6000 – 1000 – 4000 = 1000 T – G = - 200

2% : S = $600 ; D = $1500 = shortage = market forces Real Int Rate up

Page 6: Ch 25 Study Guide National Savings = Y-C-G = I6000 - 4000 – 1200 = 800 Y – T – C 6000 – 1000 – 4000 = 1000 T – G = - 200

Decrease Savings by $400 at any given Int. Rate

5% $800

Page 7: Ch 25 Study Guide National Savings = Y-C-G = I6000 - 4000 – 1200 = 800 Y – T – C 6000 – 1000 – 4000 = 1000 T – G = - 200

d. Start at equilibrium; government gives investment tax credit ; stimulates D for LF by $400 at any real int. rate ; new equilibrium?

5% $1200

Page 8: Ch 25 Study Guide National Savings = Y-C-G = I6000 - 4000 – 1200 = 800 Y – T – C 6000 – 1000 – 4000 = 1000 T – G = - 200

Bonus: Compare parts c. and d.

• Which is most likely to increase growth?