Using the following diagram, find the equilibrium interest rate when the share of government purchases in the long run is 20 percent. Show what happens to all the variables if there is an increase in investment because of a new tax policy that encourages investment. R 7.5- 7.5- 7.5 7.5- 5.0- R 5.0- R 5.0- R 5.0- 2.5- 2.5- 2.5- 2.5- 0.0 0.0 0.0 0.0 62.5 65.0 67.5 Percent 12.5 15.0 17.5 Percent -2.5 0.0 2.5 Percent (a) Consumption Share (b) Investment Share (c) Net Exports Share Equilibrium interest rate = 4% Investment share=[ % Net export share= Consumption share=[ NG 72.5 80 87.5 Percent d) Nongovernment Share

Using the following diagram, find the equilibrium interest rate when the share of government purchases in the long run is 20 percent. Show what happens to all the variables if there is an increase in investment because of a new tax policy that encourages investment. R 7.5- 7.5- 7.5 7.5- 5.0- R 5.0- R 5.0- R 5.0- 2.5- 2.5- 2.5- 2.5- 0.0 0.0 0.0 0.0 62.5 65.0 67.5 Percent 12.5 15.0 17.5 Percent -2.5 0.0 2.5 Percent (a) Consumption Share (b) Investment Share (c) Net Exports Share Equilibrium interest rate = 4% Investment share=[ % Net export share= Consumption share=[ NG 72.5 80 87.5 Percent d) Nongovernment Share

Economics For Today

10th Edition

ISBN:9781337613040

Author:Tucker

Publisher:Tucker

Chapter18: The Keynesian Model

Section: Chapter Questions

Problem 6SQP

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