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An eonomy has full-employment output (Y') of 600. Government purchases, G, are 120. Desired consumption and desired investment are Cd = 360 200r + 0.103?1
An eonomy has full-employment output (Y') of 600. Government purchases, G, are 120. Desired consumption and desired investment are Cd = 360 200r + 0.103?1 and Id = 120 4001', where Y is output and r is the real interest rate. (a) (5 marks) Find an equation relating desired national saving S\"I to r and Y. (b) (5 marks) Find the real interest rate that clears the goods market. Assume that output equals full-employment output. (c) (5 marks) Government purchases rise to 144. How does this increase change the equation describing desired national saving? Show the change graphically. (d) (5 marks) Miat happens to the market-clearing real interest rate
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