Preamble for Questions 1-8. Consider a fish/fishing rod economy, with Crusoe and Friday the entire population. The local currency is the dollar, and the prices of a fish and a fishing rod are $1 and $30 respectively. Over the year Friday spends all his time making fishing rods for himself, Crusoe all his time fishing (by tickling them). Over the year Friday successfully completes 20 fishing rods (which Friday keeps) and Crusoe catches 800 fish. Each man eats 10 fish per month; Friday borrows his 120 fish from Crusoe (you can think of him as borrowing $120 from Crusoe and then using that money to buy 120 of Crusoe's fish), and will repay Crusoe with 138 fish next year. They form a government to which each contributes $200 in taxes; the government buys x fish from Crusoe (where x is some number) to feed to the governmental wolfhound, Gelert. Any fish that Crusoe catches that he does not eat, lend to Friday or sell to the government, he sells to a neighbouring island (i.e. abroad).

National savings S = Sp + Sg over the year are equal to $1000.

Your answers to questions 1-8 should just be numbers, i.e. should not feature x.

1. What is Y , total GDP in this economy?

2. What is I, total investment spending in this economy? [As usual, treat Friday as buying the fishing rods that he makes from himself, so that his investment spending is equal to the value of his output.]

3. What is the value of Sp, total private savings?

4. What is the value of G, government spending?

5. What is the value of net exports NX?

6. What is the real interest rate in this economy? [If you think the answer is 50%, write 50 and not 0.5.]