Question

In: Economics

Two nations are located next to one another. In Nation A, people are very thrifty and...

Two nations are located next to one another. In Nation A, people are very thrifty and spend much less than their incomes; moreover, Nation A’s government runs a balanced budget every year. In Nation B, people spend all of their incomes, but their government runs consistent deficits. If Nation A’s puts the extra savings to Nation B, what happens to equilibrium interest rate in Nation B?

Solutions

Expert Solution

A government is said to run fiscal deficit when its revenue is less than its budget spending. In the given question, Nation B runs consistent deficits, whereas Nation A has balanced budget. Also people in Nation A don't spend all of their income, thus they must have surplus savings with them whereas people in Nation B have no savings as they spend all of their income.

Now, Nation B with needs of more funds ( due to government borrowing as well as no savings with people ) would generally have a higher equilibrium interest rate. If Nation A puts the extra savings to Nation B the equilibrium interest rate in Nation B will fall with more liquidity than before.


Related Solutions

PART A Choose one developed nation, one transitional and two developing nations to discuss. Write an...
PART A Choose one developed nation, one transitional and two developing nations to discuss. Write an essay that addresses the following questions:    Find and discuss some of the key policy issues facing each nation. Why do you classify them as developed, transitional or developing? Discuss what you think are the factors in their political systems, history, etc. impact the ability of these nations to address their policy challenges and develop.   Based upon your research, are you optimistic about their...
One speaker A is located at the origin and another speaker B, is located at the...
One speaker A is located at the origin and another speaker B, is located at the point (3.0), the units in the xy plane is measured in meters and the speakers are the same. At a point P = (1,4) a microphone is placed. The speakers are connected to a tone generator that generates sine tones (flat waves) so that speakers B is ?/4 after A in phase and the sound speed is 350m / s. a) Draw time graphs...
One speaker A is located at the origin and another speaker B, is located at the...
One speaker A is located at the origin and another speaker B, is located at the point (3.0), the units in the xy plane is measured in meters and the speakers are the same. At a point P = (1,4) a microphone is placed. The speakers are connected to a tone generator that generates sine tones (flat waves) so that speaker B is ? / 4 after A in phase and the sound speed is 350m / s. a) Draw...
One speaker A is located at the origin and another speaker B is located at the...
One speaker A is located at the origin and another speaker B is located at the point (3,0), the units in the xy plane is measured in meters and the speakers are the same. At a point P = (1,4) a microphone is placed. The speakers are connected to a tone generator that generates Sine-tones (flat waves ) so that speaker B is pi/4 after A in phase and the sound speed is 350 m/s a) draw a time graphs...
Two spheres are located 0.60 m from one another. Sphere A with a charge of +...
Two spheres are located 0.60 m from one another. Sphere A with a charge of + 2 x 10–4 C, is fixed in position, but sphere B with a charge of +4 x 10–5 C is free to move. Spheres A and B each have a mass of 10 g. How far is sphere B (assume vi=0) when it reaches a speed of 80 m/s from sphere A? Please show and explain as much work as possible. Thank you!
1A.  Assume a two-nation world consisting of Nations East and West.  Assume both nations are using their resources...
1A.  Assume a two-nation world consisting of Nations East and West.  Assume both nations are using their resources to the best of their abilities and that the tables below for each nation show the various combinations of Food and Clothing each can produce.  Assume that Nation East currently is specializing in the production of Food and is producing at combination A.  West, choosing to be self-sufficient, is producing at combination C.  East has chosen to produce at combination A because it produces Food twice as...
One speaker A is located in origin and another speaker B, is located at the point...
One speaker A is located in origin and another speaker B, is located at the point (3.0), the units in the xy-plane are measured in meters and the speakers are the same. At a point P = (1,4) a microphone is placed. The speakers are connected to a tone generator that generates sinus tones (flat waves) so that speaker B is ? / 4 after A in phase and the sound speed is 350 m / s a) Draw time...
1. Assume that there are two nations, Alpha and Beta. Each nation produces two products, wheat...
1. Assume that there are two nations, Alpha and Beta. Each nation produces two products, wheat and steel. Alpha has a comparative advantage in the production of wheat. If the two nations trade, the trade price of wheat in terms of steel will be a. less than the domestic opportunity cost of wheat in Alpha and greater than the domestic opportunity cost of wheat in Beta. b. greater than the domestic opportunity cost of wheat in Alpha and less than...
If there are two identical pots of water next to one another and you bring both...
If there are two identical pots of water next to one another and you bring both of them to boiling but remove one from the heating device but keep one of them on the device but reduce the temperature to 60 degrees C which pot of water will reach 60 C first? Thank you for your help!
One speaker A is located in origin and another speaker B is located at point (3.0),...
One speaker A is located in origin and another speaker B is located at point (3.0), the units in the xy plane measure in meters and the speakers are the same. At a point P = (1,4) is one microphone placed. The speakers are connected to a tone generator that generates sinus tones (flat waves) so that speaker B lies ?/4 after A in phase and the sound speed is 350m/s. a) Draw time graphs for both speakers' oscillations when...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT