Investment to analyze the effects on the real interest rate

Reference no: EM13684659

For each of the following scenarios, use a well-labelled diagram of the demand and supply for saving and investment to analyze the effects on the real interest rate, equilibrium national savings, and equilibrium investment.

1. U.S. military involvement abroad declines. As a result, the government deficit shrinks.

2. A new generation of computer-controlled machines becomes available. These machines produce manufactured goods much more rapidly with fewer defects.

3. Concerns about job security cause people to engage in more precautionary savings.

4. Businesses become pessimistic about customer demand for their products in the future. As a result, they expect that the prices at which they will be able to sell their products at will decline.

Reference no: EM13684659

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