Consider an economy described as follows:

Y=C+I+G

Y=8,000

G=2,500

T=2,000

C=1000+2/3(YT)

I=1,200100r

a.In this economy, compute private saving, public saving, and national saving.

b.Find the equilibrium interest rate.

c.Now suppose thatGis reduced by 500. Compute private saving, public saving, and national saving.

d.Find the new equilibrium interest rate