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A closed economy has full-employment output of 9000, and government purchases are 2000. Desired consumption and investment are as follows Real interest rate Desired Consumption
A closed economy has full-employment output of 9000, and government purchases are 2000. Desired consumption and investment are as follows Real interest rate Desired Consumption Desired investment 2 6100 1500 3 6000 1400 4 5900 1300 5 5800 1200 6 5700 1100 a) Why do desired consumption and desired investment fall as real interest rates rise b) Find desired national savings for each value of real interest rate c) With what real interest rate is the goods market in equilibrium, that is Savings equal to Investment. Graph d) If government purchases fall to 1600 what is the equilibrium interest rate now. Explain and show in the graph
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