Assume That GDP (Y) Is 5,000

Essay

Assume that GDP (Y) is 5,000. Consumption (C) is given by the equation C = 1,200 + 0.3(Y - T) - 50r, where r is the real interest rate, in percent. Investment (I) is given by the equation I = 1,500 - 50r. Taxes (T) are 1,000, and government spending (G) is 1,500.
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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?​