An Economy Has Full-Employment Output of 5000

question 92

Essay

An economy has full-employment output of 5000.Government purchases are 1000.Desired consumption and desired investment are given by
= 3000 - 2000r + 0.10Y
= 1000 - 4000r
where Y is output and r is the expected real interest rate.
(a)Find the real interest rate that clears the goods market.Assume that output equals full-employment output.
(b)Calculate the amount of saving,investment,and consumption in equilibrium.
(c)If a shock to wealth causes desired consumption to decline by 200 (so that the new equation for desired consumption is = 2800 - 2000r + 0.10Y),find the equilibrium real interest rate,saving,investment,and consumption.

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Definitions:

Dishonest Conduct

Actions that are deceitful, fraudulent, or lack integrity, often intended to gain an unfair advantage.

Just Cause

A valid reason to dismiss an employee without notice.

Summary Dismissal

A legal action resulting in the immediate termination of an employee or ending of a contract without notice, due to a breach or misconduct.

Termination

The act of ending something, such as a contractual agreement, employment, or service, either by mutual agreement or through a unilateral decision.