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

question 60

Essay

Use a saving-investment diagram to explain what happens to saving,investment,and the real interest rate in each of the following scenarios.
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 is 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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