Consider an the following equations: Y=C + I +G Y=7,000 G=4000 T=2,000 C=150+0.75(Y-T) I=1,000-50r a. compute private saving, public saving and national saving. b. Calculate the equilibrium interest rate. c. Now suppose the G rises BY 1,000. Compute private saving, public saving, and national saving.
- Consider an the following equations:
Y=C + I +G
Y=7,000
G=4000
T=2,000
C=150+0.75(Y-T)
I=1,000-50r
a. compute private saving,
b. Calculate the equilibrium interest rate.
c. Now suppose the G rises BY 1,000. Compute private saving, public saving, and national saving.
First compute the value of consumption
C = 150 + 0.75(Y-T)
=> C = 150 + 0.75 (7000 - 2000)
=> C = 3900
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Calculation of private saving
Private saving = Y - C - T
=> Private saving = 7000 - 3900 - 2000
=> Private saving = 1100
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Calculation of public saving
Public saving = T - G
=> Public saving = 2000 - 4000
=> Public saving = -2000
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Calculation of national saving
National saving = Private saving + Public saving
=>National saving = (Y - C -T) + (T -G)
=> National saving = Y - C - G
=> National saving = 7000 - 3900 - 4000
=> National saving = -900
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