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Q3 (25pts). An economy has government purchases G of 1000. Desired national saving and desired investment are given by sd 200+ 5000+ 0.10Y-0.20G Id=1000-4000r
Q3 (25pts). An economy has government purchases G of 1000. Desired national saving and desired investment are given by sd 200+ 5000+ 0.10Y-0.20G Id=1000-4000r When the full-employment level of output equals 5000, what will be the real interest rate r that clears the goods market? Draw your results in a graph. Explain how an increase in G may affect the real interest rate in the equilibrium (please use a graph).
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