Académique Documents
Professionnel Documents
Culture Documents
THE
1
FINANCIAL INSTITUTIONS
| The
FINANCIAL INSTITUTIONS
|
Banks
3/26/2011
NATIONAL SAVING
National saving
(Y T C) +
(T G)
Y C G
Y = C + I + G + NX
For the rest of this chapter, focus on the closed economy
case:
Y=C+I+G
Solve for I:
I = YCG
national saving
= (Y T C) + (T G)
3/26/2011
Budget deficit
= a shortfall of tax revenue from govt spending
= GT
= (public saving)
ACTIVE LEARNING
A. CALCULATIONS
ACTIVE LEARNING
ANSWERS, PART A
Given:
Y = 10.0,
C = 6.5,
G = 2.0,
G T = 0.3
3/26/2011
ACTIVE LEARNING
10
10
ACTIVE LEARNING
ANSWERS, PART B
11
ACTIVE LEARNING
C. DISCUSSION QUESTIONS
The two scenarios from this exercise were:
1. Consumers save the full proceeds of the
tax cut.
2. Consumers save 1/4 of the tax cut and spend the other
3/4.
12
12
3/26/2011
y
y
13
Examples of investment:
y
15
3/26/2011
17
Supply
6%
3%
60
An increase in
the interest rate
makes saving
more attractive,
which increases
the quantity of
loanable funds
supplied.
80 Loanable Funds
($billions)
18
3/26/2011
7%
4%
Demand
50
80 Loanable Funds
($billions)
EQUILIBRIUM
Interest
Rate
Supply
20
5%
Demand
60
Loanable Funds
($billions)
21
3/26/2011
S1
S2
5%
4%
D1
60 70
Loanable Funds
($billions)
22
An investment tax
credit increases the
demand for L.F.
S1
6%
5%
D2
eq m interest rate
eqm
and increases the
eqm quantity of L.F.
D1
60 70
ACTIVE LEARNING
EXERCISE
Loanable Funds
($billions)
23
24
3/26/2011
ACTIVE LEARNING
ANSWERS
Interest
Rate
S2
S1
6%
5%
50 60
Loanable Funds
($billions)
25
25
26
27
3/26/2011
WW2
100%
80%
60%
Revolutionary
W
War
40%
Civil
War
WW1
20%
0%
28
1790 1810 1830 1850 1870 1890 1910 1930 1950 1970 1990 2010
28
CONCLUSION
| Like
10