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

question 79

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)In an agricultural economy,great weather this year promises a bumper crop next year,leading citizens to expect higher income next year.
(b)Government regulations going into effect next year will reduce the marginal product of capital.
(c)The government increases lump-sum taxes on citizens.

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Definitions:

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Pentagon Papers

Classified documents leaked in 1971 that revealed U.S. government knowledge and actions regarding the Vietnam War not previously disclosed to the public.

New York Times v. United States

A landmark Supreme Court case in 1971 that made it possible for the New York Times and Washington Post newspapers to publish the then-classified Pentagon Papers without risk of government censorship or punishment.

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