Purchases of goods declined as portion of overall output

Reference no: EM13692596

During the 1990s government purchases of goods declined as portion of overall output, in part because of the end of the cold war. If we ignore trade and treat the U.S. as a closed economy, what would be the predicted long-run result of this shift on (a) output, (b) consumption, (c) investment, (d) the real interest rate? If, instead, we treat the economy as a large open economy, what would be the predicted long-run result of this shift on (a) output, (b) consumption, (c) investment, (d) the real interest rate, and (e) the net rate of borrowing from or lending to foreigners? (Include the appropriate diagrams in each case).

Reference no: EM13692596

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