Handout 3d - Page 2 of 2 c. From 1980 to 2004, private and...

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Handout 3d – Saving and Investment Spring 2007 Page 1 of 2 The following table shows private saving and public saving for the U.S. and the Euro area in 1970 to the present. In this handout, you will use you the closed-economy saving-investment diagram of chapter 9 to examine the trends in U.S. and European saving and investment. U.S. Euro Area Year Private Saving Public Saving National Saving Private Saving Public Saving National Saving (% of GDP) (% of GDP) (% of GDP) (% of GDP) (% of GDP) (% of GDP) 1970 17.5 2.0 23.5 4.8 1980 21.2 0.6 22.0 -0.5 2004 15.0 -1.5 19.8 1.8 a. In the table above, calculate the national savings rate for the U.S. and the Euro area. b. In the space provided below, draw a saving-investment diagram for the U.S. and for the Euro area in 1980. Please label the saving and investment curves S 1980 and I 1980 in each diagram.
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Handout 3d – Saving and Investment Spring 2007
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Unformatted text preview: Page 2 of 2 c. From 1980 to 2004, private and public saving in the U.S. feel markedly. Using saving-investment diagram of part b, show the impact of the decrease in private and public saving on the equilibrium real interest rate ( r ) and investment ( I ) in 2004 for the U.S. Please label the new curve either S 2004 . d. In part c, explain why investment decreased by a lot in the United States. e. From 1990 to 2004, private saving decreased in the Euro area but public saving increased in the Euro area. What was the net effect of these two trends on Euro national savings ( S ). Using saving-investment diagram of part b, show the impact of the change in national saving on the equilibrium real interest rate ( r ) and investment ( I ) in 2004 for the Euro area. Please label the new curve either S 2004 . f. In part e, explain why investment increased by a little in the Euro area....
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Handout 3d - Page 2 of 2 c. From 1980 to 2004, private and...

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