1. Desired consumption and investment are Ct = 360 — 200r + 0.10¥; If = 120 — 400r, As usual, Y is output and r is the real interest rate. Government purchases G are 120.

a. Find an equation relating desired national saving St to rand ¥.

b. What value of the real interest rate clears the goods market when ¥= 600? Use both formsof the goods market equilibrium condition, What value of the real interest rate clears the goods market when 640? Graph the IS curve. . Government, purchases rise to 132. How does this increase change the equation for national saving in part (a)? What valueof the real interest rate clears the goods market when ¥= 600? Use both forms of the goods market equilibrium condition. How is the JS curve affected by the increase in G?