Assume That GDP (Y) Is 5,000

question 8

Essay

Assume that GDP (Y) is 5,000. Consumption (C) is given by the equation C = 1,000 + 0.3(Y - T). Investment (I) is given by the equation I = 1,500 - 50r, where r is the real interest rate in percent. Taxes (T) are 1,000 and government spending (G) is 1,500.
a.What are the equilibrium values of C, I, and r?
b.What are the values of private saving, public saving, and national saving?
c.Now assume there is a technological innovation that makes business want to invest more. It raises the investment equation to I = 2,000 - 50r. What are the new equilibrium values of C, I, and r?
d.What are the new values of private saving, public saving, and national saving?

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Definitions:

Tightness

A cultural dimension reflecting the extent to which societies tolerate deviation from norms and behaviors, with tight societies having strict norms and little tolerance for deviation.

Self-Determination

A theoretical concept referring to individuals' ability to make choices and govern their own lives, emphasizing the importance of autonomy and control in human behavior.

Individualistic Cultures

Societies that emphasize personal goals, autonomy, and individual achievement over group objectives.

Socially Embedded

The concept of individuals or actions being situated within and influenced by a network of social relationships and structures.