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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ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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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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