Assume That Equilibrium GDP (Y) Is 5,000

question 123

Multiple Choice

Assume that equilibrium GDP (Y) is 5,000. Consumption (C) is given by the equation C = 500 + 0.6(Y - T) . Taxes (T) are equal to 600. Government spending is equal to 1,000. Investment is given by the equation I = 2,160 - 100r, where r is the real interest rate in percent. In this case, the equilibrium real interest rate is:

• A) 5 percent.
• B) 8 percent.
• C) 10 percent.
• D) 13 percent.

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