Use a Saving-Investment Diagram to Explain What Happens to Saving,investment,and

question 16

Essay

Use a saving-investment diagram to explain what happens to saving,investment,and the real interest rate in each of the following scenarios in a closed economy.
(a)Current output rises due to a temporary productivity increase.
(b)The tax code changes so that business firms face higher tax rates on their revenue (offset by other lump-sum tax changes so there's no overall change in tax revenue).
(c)The government increases spending temporarily for a one-year project to turn mercury into gold.
(d)The average educational level rises,inducing an increase in the future marginal productivity of capital.

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