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Assume the following: GDP (Y) = 5,000. C = 750 + 0.5(Y-T). I = 1500 - 50r, where r is the real rate of interest
Assume the following:
- GDP (Y) = 5,000.
- C = 750 + 0.5(Y-T).
- I = 1500 - 50r, where r is the real rate of interest in percent.
- T = 1,250
- G = 1,125
- What are the equilibrium values of C, I and r?
- What are the values of private saving, public saving, and national saving?
- A technological innovation increases investment to the function I = 2000 - 50r. What are the new equilibrium values of C, I and r?
Please show as much work as possible.
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