Assume That GDP (Y) Is 6,000

question 130

Essay

Assume that GDP (Y) is 6,000. Consumption (C) is given by the equation C = 600 + 0.6(Y - T). Investment (I) is given by the equation I = 2,000 - 100r, where r is the real rate of interest in percent. Taxes (T) are 500 and government spending (G) is also 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.If government spending rises to 1,000, what are the new equilibrium values of
C, I, and r?
d.What are the new equilibrium values of private saving, public saving, and national saving?

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