What are the final answers to each part. Consider an economy in which the consumption, investment and production functions are as follows.C = 90 +0.7(Y-T)I= 250 207F(K, L) = AK¹/2¹/2The capital and labor supply are equal to 100 each, A-10, G = 200 and T = 200. Compute theequilibrium values of output, overall labor income, consumption, public savings, national savings,investment, and the interest rate.Suppose now government spending increases to G=300 (everything else stays the same). Whathappens to output, consumption, savings, investment and the interest rate? Compute the newvalues for these variables.

Answered: Consider an economy in which the…

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

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Publisher:NEWNAN

Chapter1: Making Economics Decisions

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What are the final answers to each part.

Consider an economy in which the consumption, investment and production functions are as follows.
C = 90 +0.7(Y-T)
I= 250 207
F(K, L) = AK¹/2¹/2
The capital and labor supply are equal to 100 each, A-10, G = 200 and T = 200. Compute the
equilibrium values of output, overall labor income, consumption, public savings, national savings,
investment, and the interest rate.
Suppose now government spending increases to G=300 (everything else stays the same). What
happens to output, consumption, savings, investment and the interest rate? Compute the new
values for these variables.

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Given that,

capital and labor supply are equal to 100 each.

A = 10, G = 200, T = 200

C= 90 + 0.7(Y - T)

I = 250 - 20r

F(K,L) = AK^1/2L^1/2

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