1.Assume that GDP (Y) is 6,000. Consumption (C) is given by the equation C = 600 + 0.6(Y - T) - 100r. Investment (I) is given by the equation I = 2,000 - 100r, where r is the real rate of interest in percent. Taxes (T) are 500 and government spending (G) is also 500.

b. What are the values of private saving, public saving, and national saving?

c. If Govt spending rises to 1,000, what are the new equilibrium values of C, I, and r?

d.Illustrate what happens to S, I, and r using the loanable funds framework.