Analyze effects on real interest rate-equilibrium investment

Analyze effects on real interest rate-equilibrium investment

Microeconomics

For each of the following scenarios, use a well-labelled diagram of the supply and demand for saving and investment to analyze the effects on the real interest rate, equilibrium investment, and equilibrium national savings.

1. U.S. military involvement abroad declines. As a result, the government deficit shrinks.
2. Concerns about job security cause people to engage in more precautionary savings.
3. A new generation of computer-controlled machines becomes available. These machines produce manufactured goods much more rapidly with fewer defects.
4. Businesses become pessimistic about consumer demand for their products in the future. As a result, they expect that the prices at which they will be able to sell their products at will decline.