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(c) Calculate equilibrium GDP if the real interest rate is 1%. (Y = 625) (d) Derive the saving function for this economy? (S = -200
(c) Calculate equilibrium GDP if the real interest rate is 1%. (Y = 625) (d) Derive the saving function for this economy? (S = -200 + 0.4Y + 20r) (e) Write the equilibrium condition in terms of saving and planned investment. If r=2%, check that you get the save value for equilib rium GDP as in part (b). (S = 15). (f) In the above model we treat the real interest rate as exogenous and solve for Y. But in Chapter 3 we have a model for national saving and investment in which we solve for the real interest rate. One way to think about that model in the context of the above equations is to treat real GDP as the exogenous variable and solve for the real interest rate. Suppose we fix the value of Y = 600. Solve for the equilibrium real interest rate. (rf = 1.33%)
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