2. Consider a competitive closed economy described by the following equations: Y = 4 K0.3 L0.7 |C=200+ 0.75(Y-T); I = 425 - 25R ; K = 500; L = 500; T = 300; G = 200 a) Evaluate the Government's budget (Deficit, Surplus, Balanced)? Explain. b) Find the long-run equilibrium real interest rate. c) Suppose that government decides to run a balanced budget by setting T = G = 200. Find the new long-run equilibrium real interest rate. d) Assume the initial scenario again (T=300). Suppose that the government wants to manipulate its purchases such that r * = 8. Which value of G will make the government achieve its goal? e) Plot your results from part b, c and d in a single graph. Label it carefully and completely. f) Now assume that you are a member of the POTUS' Council of Economic Advisers. Based on your analysis of the previous 3 scenarios (baseline plus 2 simulations): i. Which scenario would you recommend if the goal of the POTUS is to maximize disposable income and household consumption? j. Which scenario would you recommend if the goal of the POTUS is to minimize the National Debt (assuming that positive governmental savings are used to repay the debt)?