What the long-run effects would be on real gdp-public saving
Course:- Business Economics
Reference No.:- EM13891949

Assignment Help
Assignment Help >> Business Economics

Many people believe that Congress will eventually have to reduce Social Security benefits in order to reduce the budget deficit. Although most of the changes would not take place until later, assume for the purpose of this problem that Social Security benefits were cut today by $100 billion per year.

A) If the marginal propensity to consume is 0.8, explain what the long-run effects would be on real GDP, public saving, and national saving.

B) The US is a large open economy with a trade deficit. Use the appropriate graphs to illustrate and state what the reduction in Social Security benefits would do to each of the following in the long run: national saving, investment, the US real interest rate, net capital outflows, the real exchange rate, and the trade deficit.

C) Now, consider the small open economy of Norway, which has a trade surplus. If the US, a large open economy, were to reduce its Social Security benefits, use the appropriate graphs to illustrate and state what would happen in the long run to Norway’s national saving, investment, interest rate, real exchange rate, and trade surplus.

Put your comment

Ask Question & Get Answers from Experts
Browse some more (Business Economics) Materials
A movie monopolist sells to college students and other adults. The demand function for students is Qds=2000-25P, and the demand function for other adults is Qds=2400-25P. Marg
Discuss how discrimination affects efficiency within organisations, with special emphasis on LGBT issues. Also discuss why we might observe discrimination, given the efficie
1. Identify 3 businesses, corporations etc. which you feel most closely fit the definition of a monopoly. Be sure to include the 2 criteria that must be present to have a mo
Alternative I require an initial investment of $20,000 and will yield a rate of 15% per year. Alternative C which requires a $30,000 investment will yield 20% per year. Which
The costs of in?ation: Consider two possible in?ation scenarios. In one, the in?ation rate is 100% per year, but it has been at this level for three decades and the central ba
A firm charges its customers $20/unit for the first unit purchased and $10 for each additional unit in excess of one unit. Suppose the firm’s marginal cost is fixed at $5. How
Discuss the following – What feature (s) of Medicare would cause an economist to say that “Medicare stinks as insurance”? Medicare supplement insurance is available from the c
Suppose there are two types of movie: Arty (A), and Popcorn (P). These films may be either Decent (D) or Terrible (T). 35% of all movies are Arty. 20% of all movies are both A