Consider the following functions for consumption and investment: C = 1,000 + (2/3)*(Y – T) and I = 1,200 – 100*r. Furthermore, Y = 8,000, G = 2500, T = 2,000.Compute private, public, and national savings for this economy, and find the equilibrium real interest rate (r).Assume that G declines by 500 units. How will it change your answers in part (a)?What happens to the national savings, given everything else, if the public decides to consume less out of their disposable income (assume that the propensity of consume falls by 10 percent)?Given your answer in part (c), what happens to investment and real interest rate?Answer all four.

Hi! thank you for the question but as per the guidelines, we answer only three subparts at a time.…

Answered: Consider the following functions for…

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 the following functions for consumption and investment: C = 1,000 + (2/3)*(Y – T) and I = 1,200 – 100*r. Furthermore, Y = 8,000, G = 2500, T = 2,000.

Compute private, public, and national savings for this economy, and find the equilibrium real interest rate (r).
Assume that G declines by 500 units. How will it change your answers in part (a)?
What happens to the national savings, given everything else, if the public decides to consume less out of their disposable income (assume that the propensity of consume falls by 10 percent)?
Given your answer in part (c), what happens to investment and real interest rate?

Answer all four.

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