Answer to Question #275613 in Macroeconomics for fahmida

Question

a. “Natural resources are the most important determinant of long-term economic growth”  – do you agree with this statement. Briefly explain your views.

b. What do you understand by the term “closed economy”? For a closed economy show,  National savings = National Investment.

2. Consumer spending in an economy is defined by the following function: Consumer spending = 200 + .85 (Disposable Income) a. Draw this function in a diagram. b. If Disposable income increases by a dollar, how much will consumer spending  increase or decrease? c. Assuming closed economy and no government, what will be the economy’s saving if  income is 4000?

Answer 1

a. On the one hand, oil, gas, and land play a significant role in the long-term growth of the economy, but on the other hand, it is necessary to effectively manage these resources, namely, to have the capital to process these resources.

b. A closed economy is an economic model that implies the use of exclusively domestic resources of a country and does not import or export anything to other countries, that is, does not participate in international trade.

The statement is true.

2.

a.

b. C=200+0.85I

C=200+0.85(I+1)

decrease

c. National savings = National Investment.

$C=200+0.85I=200+0.85\times4000=3600$