Only for when G=300 please ### Economic Model AnalysisConsider an economy in which the consumption, investment, and production functions are as follows:#### Equations:1. **Consumption (C):** \[ C = 90 + 0.7(Y - T) \]2. **Investment (I):** \[ I = 250 - 20r \]3. **Production Function (F):** \[ F(K, L) = AK^{1/2}L^{1/2} \]#### Parameters:- Capital and labor supply are equal to 100 each.- $ A = 10 $- $ G = 200 $ (initial government spending)- $ T = 200 $ (taxes)#### Task:Compute the equilibrium values for the following:- Output- Overall labor income- Consumption- Public savings- National savings- Investment- Interest rate#### Scenario:Suppose now government spending increases to $ G = 300 $ (everything else stays the same). Calculate the new values for:- Output- Consumption- Savings- Investment- Interest rateThis exercise aims to analyze the impact of increased government spending on key economic variables.

Given the production function: F(K,L)=AK1/2L1/2 In equilibrium, wages (labor income) is equal to the…

Consider an economy in which the consumption, investment and production functions are as follows. C=90 +0.7(Y-T) I = 250-20r F(K, L) = AK¹/21/2 The capital and labor supply are equal to 100 each, A-10, G = 200 and T200. 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.

Consider an economy in which the consumption, investment and production functions are as follows. C=90 +0.7(Y-T) I = 250-20r F(K, L) = AK¹/21/2 The capital and labor supply are equal to 100 each, A-10, G = 200 and T200. 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.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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