ch13

红河学院《宏观经济学》复习指南

funds demand is inelastic, changes in loanable funds supply have little effect on saving and investment, so tax incentives to increase saving at each interest rate do little for growth. If loanable funds supply is inelastic, changes in loanable funds demand have little effect on saving and investment, so tax incentives to increase investment at each interest rate do little for growth.

162.a. $40000/1.12 = $35714.29; $40000/(1.12)2 = $31887.76; $40000/(1.12)3 = $28471.21

b. No, the cost is $100000 but the present value of the return is only $96073.26.

c. Yes. Although the cost is still $100000, the present value of the returns is now the sum of $40000/1.07; $40000/(1.07)2; $40000/(1.07)3, which is t$104972.65.

d. Investment is inversely related to the interest rate; lower interest rates stimulate investment.

163.a. Moral hazard, because after she obtained the insurance, she is less careful with her health.

b. Adverse selection, because after he knows that his probability of death is higher than average, he seeks life insurance.

c. Adverse selection, because after he knows that his probability of an accident is higher than average, he seeks more auto insurance.

d. Moral hazard, because after she obtains the insurance, she becomes less careful with fire.

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