A country's economy real dollars large. people have a starvation-level consumption of and the marginal propensity to consume of . The government runs a deficit at and . There are no net exports.

Find the simultaneous equilibria on the goods and the loanable funds markets.

(a) Find the consumption. Graph the consumption decision. Label everything you deem relevant

(b) The investment demand is given by . Find the investment and the real interest rate. Graph the loanable funds market equilibrium.

(c) MPC decreases to 0.6. What will such a Keynesian recession do to the equilibrium real rate? You can calculate the new rate but don't have to. Graph the shift of the equilibrium on the loanable funds market. Clearly indicate the before and after states.