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Consider an economy in which the consumption, investment and production functions are as follows. C = 9 + 0.7(Y T) I = 25 2r F(K,
Consider an economy in which the consumption, investment and production functions are as follows.
C = 9 + 0.7(Y T)
I = 25 2r
F(K, L) = K^(1/2) L^(1/2)
The capital and labor supply are equal to 100 each, G = 20 and T = 20. Compute the equilibrium values of output, overall labor income, consumption, public savings, national savings, investment, and the interest rate.
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