Suppose savers either buy bonds or make deposits in savings

Assignment Help Business Economics

Reference no: EM13898284

Suppose savers either buy bonds or make deposits in savings accounts at banks. Initially, the interest income earned on bonds or deposits is taxed at a rate of 20%. Now suppose there is an increase in the tax rate on interest income, from 20% to 25%.

This change in the tax treatment of interest income from saving causes the equilibrium interest rate in the market for loan able funds to( fall, rise) and the level of investment spending to (increase, decrease) .

An investment tax credit effectively lowers the tax bill of any firm that purchases new capital in the relevant time period. Suppose the government implements a new investment tax credit.

The implementation of the new tax credit causes the interest rate to (rise, fall) and the level of saving to (rise, fall)

Initially, the government's budget is balanced, then the government responds to the conclusion of a war by significantly reducing defense spending without changing taxes.

This change in spending causes the government to run a budget (surplus, deficit ) which ( increases, decreases) national saving.

This causes the interest rate to (rise, fall) , (crowding out, increasing) the level of investment spending.

Reference no: EM13898284

Questions Cloud

The income statement that classifies costs by their behavior : The income statement that classifies costs by their behavior is called the:

What checks and balances are required for these three levels : What checks and balances are required for these three levels after Americas latest mortgage meltdown?

The job order and process costing systems : The job order and process costing systems are

Restructuring plan-attempt to reverse declining global sales : According to the Wall Street Journal, Mitsubishi Motors recently announced a major restructuring plan in an attempt to reverse declining global sales. Suppose that as part of the restructuring plan Mitsubishi conducts an analysis of how labor and cap..

Suppose savers either buy bonds or make deposits in savings : Suppose savers either buy bonds or make deposits in savings accounts at banks. Initially, the interest income earned on bonds or deposits is taxed at a rate of 20%. Now suppose there is an increase in the tax rate on interest income, from 20% to 25%...

History was labor productivity growth in agriculture highest : Consider Figure 9.3. In which periods of U.S. history was output growth in agriculture the highest? In which periods of U.S. history was labor productivity growth in agriculture the highest? If the price is currently $15, then what is the price elast..

Using actual cost system to allocate overhead : One problem with using an actual cost system to allocate overhead is that:

What is the ideal efficiency of an automobile engine : What is the ideal efficiency of an automobile engine in which fuel is heated to 2700 K and the outdoor air is 270 K? Taking this literally, show that the temperature she wishes for would be -131.5°C.

Identify how communicate information to the health care : Identify how you would communicate this information to the health care team to coordinate care

User Account

All Pages