In an economy, desired consumption and investment are given by35-Cd = 4,500 + 0.20Y- 5,000rN = 3,000 - 4,000r30-where Y is output and r is the real interest rate.25-Government purchases are G = 2,000.20-The equation for desired national saving is given by:s4 = -6,500 + 0.80Y + 5,000r.15-When Y = 10,000, the equilibrium rate of interest is calculated to10-ber= 17%.When Y = 10,200, the equilibrium rate of interest is calculated tobe r= 15%.5-These equilibrium output and interest rate combinations are usedto draw the initial IS curve labeled IS,-9.910.010.110.210.3Output, Y (thousands)Now the level of government purchases increases to 2,500.Determine the equation for the new saving function:Real interest rate, r

Answer: National saving = Private saving + Government saving Now, Private saving = Income (Y) -…

In an economy, desired consumption and investment are given by 35- cd - 4,500 + 0.20Y-5,000r = 3,000 - 4,000r 30- where Y is output and r is the real interest rate. 25- Government purchases are G = 2,000. 20- The equation for desired national saving is given by: IS, s4 - - 6,500 + 0.80Y + 5,000r. 154 When Y= 10,000, the equilibrium rate of interest is calculated to ber= 17%. 10 When Y= 10,200, the oquilibrium rate of intorost is calculated to be r= 15% 54 These equilibrium output and interest rate combinations are used to draw the initial IS curvo labolod Is, 10.1 Output, Y (thousands) 9.9 10.0 10.2 10.3 Now the level of government purchases increases to 2,500. Determine the equation for the now saving function Real interest rate, r

In an economy, desired consumption and investment are given by 35- cd - 4,500 + 0.20Y-5,000r = 3,000 - 4,000r 30- where Y is output and r is the real interest rate. 25- Government purchases are G = 2,000. 20- The equation for desired national saving is given by: IS, s4 - - 6,500 + 0.80Y + 5,000r. 154 When Y= 10,000, the equilibrium rate of interest is calculated to ber= 17%. 10 When Y= 10,200, the oquilibrium rate of intorost is calculated to be r= 15% 54 These equilibrium output and interest rate combinations are used to draw the initial IS curvo labolod Is, 10.1 Output, Y (thousands) 9.9 10.0 10.2 10.3 Now the level of government purchases increases to 2,500. Determine the equation for the now saving function Real interest rate, r

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Concept explainers

Public Saving

Public saving deals with the amount which has been in excess after meeting all the obligatory expenses and investment of the government. Taxes are collected by the government to meet its day-to-day expenditures. The obligatory expenses include all those expenses which are mandatory for the government. It cannot be avoided as it is inevitable.

Question

In an economy, desired consumption and investment are given by
35-
Cd = 4,500 + 0.20Y- 5,000r
N = 3,000 - 4,000r
30-
where Y is output and r is the real interest rate.
25-
Government purchases are G = 2,000.
20-
The equation for desired national saving is given by:
s4 = -6,500 + 0.80Y + 5,000r.
15-
When Y = 10,000, the equilibrium rate of interest is calculated to
10-
ber= 17%.
When Y = 10,200, the equilibrium rate of interest is calculated to
be r= 15%.
5-
These equilibrium output and interest rate combinations are used
to draw the initial IS curve labeled IS,-
9.9
10.0
10.1
10.2
10.3
Output, Y (thousands)
Now the level of government purchases increases to 2,500.
Determine the equation for the new saving function:
Real interest rate, r

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