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Economists in Planet Earth, a closed economy, have collected the following information about the economy for a particular year: Potential real GDP 100) G=30 T-25 C-0.8 (Y-T)-3r O 7.50 percent O 1.25 percent O 0.50 percent O 3.00 percent 1-40-7r where r is the country's real interest rate, expressed in percent (i.e., if r-5, the real interest rate is 5%). Assume that Planet Earth is producing at potential GDP. What is the equilibrium real interest rate?

Economists in Planet Earth, a closed economy, have collected the following information about the economy for a particular year: Potential real GDP 100) G=30 T-25 C-0.8 (Y-T)-3r O 7.50 percent O 1.25 percent O 0.50 percent O 3.00 percent 1-40-7r where r is the country's real interest rate, expressed in percent (i.e., if r-5, the real interest rate is 5%). Assume that Planet Earth is producing at potential GDP. What is the equilibrium real interest rate?

Economics: Private and Public Choice (MindTap Course List)
Economics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506725
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter9: An Introduction To Basic Macroeconomic Markets
Section: Chapter Questions
Problem 9CQ
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Economists in Planet Earth, a closed economy, have collected the following information about the economy for a particular year: Potential real GDP 100) G=30 T-25 C-0.8 (Y-T)-3r O 7.50 percent O 1.25 percent O 0.50 percent O 3.00 percent 1=40-7r where r is the country's real interest rate, expressed in percent (i.e., if r-5, the real interest rate is 5%). Assume that Planet Earth is producing at potential GDP. What is the equilibrium real interest rate?
Transcribed Image Text:Economists in Planet Earth, a closed economy, have collected the following information about the economy for a particular year: Potential real GDP 100) G=30 T-25 C-0.8 (Y-T)-3r O 7.50 percent O 1.25 percent O 0.50 percent O 3.00 percent 1=40-7r where r is the country's real interest rate, expressed in percent (i.e., if r-5, the real interest rate is 5%). Assume that Planet Earth is producing at potential GDP. What is the equilibrium real interest rate?
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