Incorrect Question 7 0 / 10 pts If you are told that the saving rate in the US has increased, but the current account deficit has also increased... ...it must be that the demand for investment has increased more than proportionally ...it must be that the demand for investment has decreased more than proportionally The economy must be in a recession Not enough information
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Step 1: An increase in the saving rate means that people are saving more of their income rather than spending it. Show more…
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Suppose that the investment demand curve in a certain economy is such that investment declines by $110 billion for every 1 percentage point increase in the real interest rate. Also, suppose that the investment demand curve shifts rightward by $170 billion at each real interest rate for every 1 percentage point increase in the expected rate of return from investment. If stimulus spending (an expansionary fiscal policy) by government increases the real interest rate by 2 percentage points, but also raises the expected rate of return on investment by 1 percentage point, how much investment, if any, will be crowded out?
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