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Desired consumption and investment are C^d=360-200r+0.10Y I^d=120-400r As usual, Y is output and r is the real interest rate. Government purchases G are 120. Find

Desired consumption and investment are

C^d=360-200r+0.10Y

I^d=120-400r

As usual, Y is output and r is the real interest rate. Government purchases G are 120.

  1. Find an equation relating desired national saving Sd to r and Y.
  2. What value of the real interest rate clears the goods market when Y = 600? Use both forms of the goods market equilibrium condition. What value of the real interest rate clears the goods market when Y = 640?What if Y = 560? What if Y = 680?
  3. Graph the IS curve.

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