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1) An investment-tax credit provides businesses with a "credit" on their federal income-tax obligation that is proportional to the dollars spent on qualifying capital goods purchases during a given tax year. A 10% tax credit might work as follows. Consider the purchase of a new computer system for your company which costs $100,000. This investment would translate into a $10,000 credit (reduction) on taxes owed by the company at the end of the year. Thus a policy enacting an investment tax credit is expected to increase the demand for investment goods at every interest rate. What happens to the demand for loanable funds if there is an increase in the domestic demand for investment goods at every real interest rate?
2) Using the 3-graph model developed in chapter 14, consider first the impact on the demand for loanable funds. If businesses respond as expected to the investment-tax credit, what will happen to the demand for loanable funds? Given this, what, if any, change will there be in interest rates. If interest rates change, then what will the expected impact be on net capital outflow (net foreign investment)? A rise in the real interest rate causes net capital outflow (aka net foreign investment) to move in a negative direction. Think about this in the following way. As real interest rates in the US rise (relative to real rates in the rest of the world) the foreign demand for US assets rises. At the same time the US demand for foreign assets will fall because of the higher return available in the US. Both effects cause net foreign investment to move in a negative direction
Use the market-clearing Real Business Cycle model developed in chapters 9-11, to analyze the effects of expectations of higher future government spending and (lump-sum) taxes. Under what conditions can this explain a slow recovery?
The government should not be in the organization of promoting renewable power, but should simply set a reasonable price on greenhouse gases
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Variables also spell out the assumptions related to the use
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You have the alternative of leasing an asset for $100,000 a year, with payments to be made at the end of each year of use. This lease cannot be cancelled.
You are the adviser to a Benevolent Social Planner. GDP is falling also the economy is in a recession.
The economy of a country called Econoland is described by the following desired aggregate expenditure components (all figures in billions of $). For the purposes of this question, the first set of equations will be referred to as fiscal policy1.
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