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4. Consider a classical economy described as follows: 1 1 Y = LžKz, where L is the amount of labor and K is the amount of capital. The economy has 10,000 units of labor and 10,000 units of capital. Consumption (C): 5,020-100r, Investment (I) : 2,000-100r, Taxes (T): 2,500, Government Purchases (G) :3,000 a. Compute the total production and find the equilibrium interest rate. b. Compute private saving, government saving, and national saving. c. Now suppose that G is reduced by 10. Find the new equilibrium interest rate. What happens to consumption, private saving, government saving, national saving and investment?

4. Consider a classical economy described as follows: 1 1 Y = LžKz, where L is the amount of labor and K is the amount of capital. The economy has 10,000 units of labor and 10,000 units of capital. Consumption (C): 5,020-100r, Investment (I) : 2,000-100r, Taxes (T): 2,500, Government Purchases (G) :3,000 a. Compute the total production and find the equilibrium interest rate. b. Compute private saving, government saving, and national saving. c. Now suppose that G is reduced by 10. Find the new equilibrium interest rate. What happens to consumption, private saving, government saving, national saving and investment?

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
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Consider a classical economy described as follows:

? = ?^(1/2)?^(1/2) , where L is the amount of labor and K is the amount of capital. The economy has 10,000 units of labor and 10,000 units of capital.

Consumption (C): 5,020-100r, Investment (I) : 2,000-100r, Taxes (T): 2,500, Government Purchases (G) :3,000

4. Consider a classical economy described as follows: 1 1 Y = LZK 2, where L is the amount of labor and K is the amount of capital. The economy has 10,000 units of labor and 10,000 units of capital. Consumption (C): 5,020-100r, Investment (I): 2,000-100r, Taxes (T): 2,500, Government Purchases (G) :3,000 a. Compute the total production and find the equilibrium interest rate. b. Compute private saving, government saving, and national saving. c. Now suppose that G is reduced by 10. Find the new equilibrium interest rate. What happens to consumption, private saving, government saving, national saving and investment?
Transcribed Image Text:4. Consider a classical economy described as follows: 1 1 Y = LZK 2, where L is the amount of labor and K is the amount of capital. The economy has 10,000 units of labor and 10,000 units of capital. Consumption (C): 5,020-100r, Investment (I): 2,000-100r, Taxes (T): 2,500, Government Purchases (G) :3,000 a. Compute the total production and find the equilibrium interest rate. b. Compute private saving, government saving, and national saving. c. Now suppose that G is reduced by 10. Find the new equilibrium interest rate. What happens to consumption, private saving, government saving, national saving and investment?
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