Which of the following would be considered as example(s) of investment by a macr

Question

Which of the following would be considered as example(s) of investment by a macroeconomist?

Imagine a closed economy where the GDP equals $30 million, consumption equals $15 million, taxes equal $5 million and government purchases are $7 million. What are private saving, public saving and national saving?

In 2012 country Z had a large budget surplus. In 2013, the budget surplus became smaller. Assuming that all other things are held constant, the decrease in the budget surplus should have

Which of the following situations would encourage people to borrow the most?

The management of Super Block Construction Company is considering an investment project which would have a present cost of $1,700,000 and would yield a one-time payoff of $3,000,000 in 10 years. What is the highest interest rate at which the management of the company would find this project profitable?

Explanation / Answer

Private saving S= (Y-C-T) = 30-15-5 =$ 10 million

National saving = Private saving + Public Saving = 10-2 = $8 million

Thus the correct option is (a)

3. Decrease in the budget surplus imply that the government spending reduced because of which the demand forloanable funds fell and the interest rate rose which in turn reduced the investment level. Thus the correct answer is (b)

4.People borrow when the real interest rate is low and the inflation is high. Thus the correct option is (a). Real interest rate = nominal –inflation = 1%

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