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Consider an economy with full-employment output of 5000 and government purchases G of 1000. Desired consumption and desired investment are: C^d=2500-1000r+0.5Y, I^d=500-2000r. Find an equation
Consider an economy with full-employment output of 5000 and government purchases G of 1000. Desired consumption and desired investment are: C^d=2500-1000r+0.5Y, I^d=500-2000r. Find an equation relating desired saving Y^d to r and Y. Find the real interest rate that clears the goods market. Government purchases rise to 1200. How does this increase change the equation describing desired national saving? What happens to the market-clearing real interest rate
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