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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