Some economists argue as follows: Suppose that Y=Y* currently. An increased rate of saving from income (a...

Some economists argue as follows:

Suppose that Y=Y* currently. An increased rate of saving from income (a lower rate of consumption) reduces interest rates by raising the supply of savings that can be borrowed. Investors borrow the extra savings, and investment rises to replace the decline in consumption. Y remains at Y*.

Evaluate this argument. [Limit 80 words: 4 marks]

Answer:

Expert Solution

Rahul Sunny answered 1 year ago

Some economists and policymakers argue in favor of replacing the current income tax in the USA...

Some economists and policymakers argue in favor of replacing the current income tax in the USA with consumption tax. What are your opinions on the issue? How do think such change impacts your income and expenditure pattern? Which tax method do you prefer- Income tax or consumption tax? Why? What are the pros and cons of the two tax methods?

1. Why is the effect of saving so controversial to economists? a. increased saving always has...

1. Why is the effect of saving so controversial to economists? a. increased saving always has an unambiguously positive effect on the economy. b. increased saving always has an unambiguously negative effect on the economy. c. increased saving may hurt the economy in the short run but help it in the long run. d. decreased saving my hurt the economy in the short run but help it in the long run. e. because different schools of economic thought use different...

Some economists argue that the government intervention makes the economic outcome even worse. Some argue that...

Some economists argue that the government intervention makes the economic outcome even worse. Some argue that there are important economic roles of the government. What is your opinion? Does the government do good or bad? Briefly discuss.

Suppose the production function is written as follows: 0.5 0.5 ?=? ? Suppose that saving rate...

Suppose the production function is written as follows: 0.5 0.5 ?=? ? Suppose that saving rate (s) is 0.3, population growth rate (n) is 0.05, and capital depreciation rate (d) is 0.05. (note: when you write your equations, be careful to distinguish capitalized characters and non- capitalized characters!) 3-1. (5%) Derive the per-capita production function (i.e. ? = ? and ? = ?). ?? 3-2. (5%) Write down the key equation of the Solow model on capital accumulation per capita....

The U.S. saving rate increased from -0.1 percent in 2011 to 2.0 percent in 2012, to...

The U.S. saving rate increased from -0.1 percent in 2011 to 2.0 percent in 2012, to 2.4 percent in 2013, to 2.9 percent in 2014, and to 3.0 percent in 2015. How can the saving rate be negative? Why might a negative saving rate be something to worry about? How might U.S. saving be increased?

A. Some economists argue strongly that monopoly (or monopoly power) is a huge problem for the...

A. Some economists argue strongly that monopoly (or monopoly power) is a huge problem for the economy, and that the government needs to take vigorous action to eliminate or control monopoly (through the use of anti-trust laws or regulation). Other economists seem to believe that monopoly really isn’t a problem that we need to worry about that much. (20) 1. Why do some economists worry so much about monopoly –in what ways do they believe that monopoly is inferior to...

Many economists argue as follows: “because there is no long-run tradeoff between unemployment and inflation, there...

Many economists argue as follows: “because there is no long-run tradeoff between unemployment and inflation, there is no point in trying to shave the peaks and troughs from the business cycle.” This view suggests that we should not care whether the economy is stable or fluctuating widely as long as the average level of unemployment is the same. Discuss

Suppose that the economy’s production function is Y = K1/2 (AN)1/2 , that the saving rate,...

Suppose that the economy’s production function is Y = K1/2 (AN)1/2 , that the saving rate, s is equal to 16%, and that the rate of depreciation, ?, is equal to 10%. Suppose further that the number of workers grows at 2% per year and that the rate of technological progress is 4% per year. Find the steady values of the variables listed in (i) through (v). The capital stock per effective worker. Output per effective worker. The growth rate of...

Some economists and politicians argue that raising the minimum wage does a disservice to those it...

Some economists and politicians argue that raising the minimum wage does a disservice to those it tries to help. They claim that businesses will resist a higher minimum wage by laying off workers, moving their businesses offshore, or just closing down. Some sympathetic to the plight of the poor claim that society should deal with poverty in a different way, such as through private charities. Most opponents of a minimum wage claim that workers are free to seek better paying...

Some politicians and economists argue that tax cuts are beneficial for the government budget balance and...

Some politicians and economists argue that tax cuts are beneficial for the government budget balance and are also beneficial for the economy in the short run and the long run. Explain their arguments and evaluate them briefly.

Question