Suppose the following equations describe the relationship between the long-run shares of spending in GDP and the interest rate (R), measured in decimal fractions (that is, R = 0.05 means that the interest rate is 5 percent). Equations: C/Y* = 0.7 – 0.2(R - .05) and I/Y*= 0.2- 0.8(R - .05) XIY* = .0 - 0.95(R - .05) and G/Y* = .2 Use algebra to determine the values of the interest rate and the long-run shares of spending in GDP. R = 0.0859 X C percentage = 69.28 x % I percentage = 17.13 X % X percentage =-3.41 x % G percentage = 20 v %

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Suppose the following equations describe the relationship between the long-run shares of spending in GDP and the interest rate (R), measured in decimal fractions (that is, R = 0.05
means that the interest rate is 5 percent).
Equations: C/Y* = 0.7 – 0.2(R - .05) and I/Y*= 0.2 - 0.8(R - .05)
XIY* = .0 – 0.95(R - .05) and G/Y* = .2
Use algebra to determine the values of the interest rate and the long-run shares of spending in GDP.
R = 0.0859 X
C percentage = 69.28 x %
I percentage = 17.13 X %
X percentage -3.41 X %
G percentage =| 20 v %
Transcribed Image Text:Suppose the following equations describe the relationship between the long-run shares of spending in GDP and the interest rate (R), measured in decimal fractions (that is, R = 0.05 means that the interest rate is 5 percent). Equations: C/Y* = 0.7 – 0.2(R - .05) and I/Y*= 0.2 - 0.8(R - .05) XIY* = .0 – 0.95(R - .05) and G/Y* = .2 Use algebra to determine the values of the interest rate and the long-run shares of spending in GDP. R = 0.0859 X C percentage = 69.28 x % I percentage = 17.13 X % X percentage -3.41 X % G percentage =| 20 v %
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