Consider an economy in which GDP (Y) is 100,000. Consumption (C) is given by the equation C = 4,000 + 0.75(Y-T). Investment (I) is given by the equation I = 20,000 - 100r, where r is the real rate of interest expressed as a percentage (meaning that a value of 1% is 1 rather than 0.01). Taxes (T) are 12,000 and government spending (G) is 14,000.

a. What are the equilibrium values of C, I, and r? C: _________; I: _________; r: __________

b. What are the values of private saving, public saving, and national saving? Private saving: ___________; public saving: ____________; national saving: __________

c. Now assume business firms become more optimistic and decide to increase investment for any given level of interest rates. Specifically, the investment equation moves so that I = 10,000 - 100r. What are the new equilibrium values of C, I, and r? C: _________; I: _________; r: ________

d. What are the new values of private saving, public saving, and national saving? Private saving: ___________; public saving: ____________; national saving: __________