1. Assume that GDP (Y) is 6,000. Consumption (C) is given by the equationC= 600 + 0.6(Y-T). Investment (I) is given by the equationI= 2,000-100r, whereris the real rate of interest, in percentages. Taxes (T) are 500, and government spending (G) is also 500. (Hint:Do not convertrinto decimals.)
2. a)What are the equilibrium values ofC,I, andr?
3. b)What are the values of private saving, public saving, and national saving?
4. c)If government spending rises to 1,000, what are the new equilibrium values ofC,I, andr?