What happens if we increase the tax rate on savings

Reference no: EM133295140

Assignment:

Problems - Savings, Investment, and the Financial System

1. Why might it not be a good idea to hold large amounts of stock in the company where you work? (Compared with having stock in different companies.)

2. Suppose GDP (sometimes called Y) is $8 trillion, taxes are $1.5 trillion, private savings is $1 trillion, and public savings is -$0.5 trillion. If this economy is closed (no international trade), calculate national saving, consumption, investment, and government purchases.

3. A countries investment can be increased by reducing taxes on private savings, but also by reducing the government deficit. Why is it hard to do both of these at the same time?

4. Draw a graph for the market for Loanable Funds. Show what happens if we increase the tax rate on savings.

Reference no: EM133295140

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