Consider an economy described as follows: Y = C + I + G. Y = 8,000. G = 2,500. T = 2,000. C = 1000 + 2/3(Y – T). I = 1,200 + 100r. In this economy, compute private saving, public saving, and national saving. Find the equilibrium interest rate. Now suppose that G is reduced by 500. Compute private saving, public saving, and national saving. Find the new equilibrium interest rate
Consider an economy described as follows: Y = C + I + G. Y = 8,000. G = 2,500. T = 2,000. C = 1000 + 2/3(Y – T). I = 1,200 + 100r. In this economy, compute private saving, public saving, and national saving. Find the equilibrium interest rate. Now suppose that G is reduced by 500. Compute private saving, public saving, and national saving. Find the new equilibrium interest rate
Chapter18: The Keynesian Model
Section: Chapter Questions
Problem 6SQP
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- Consider an economy described as follows:
Y = C + I + G.
Y = 8,000.
G = 2,500.
T = 2,000.
C = 1000 + 2/3(Y – T).
I = 1,200 + 100r.
- In this economy, compute private saving,
public saving , and national saving. - Find the equilibrium interest rate.
- Now suppose that G is reduced by 500. Compute private saving, public saving, and national saving.
- Find the new equilibrium interest rate
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