The fictional country of Gallia has collected GDP data for its current business year. Its economy is closed, i.e., NX=0, and the government is currently running a budget surplus. Gallia's economists have identified the following information: Y=335,000.00C=201,000.00T=30,150.00G=56,950.00 Furthermore, its investment (I) can be described using the following function: I=110,550.003,350.00ireal, where ireal denotes Gallia's real interest rate. We further assume that the real interest rate can be interpreted as a percentage value. [Note that you are expected to show your work. Partial credit will be awarded for incomplete answers.] Given the information above, 1. find private saving, public saving, investment, and national saving. 2. find ireal. That is, the equilibrium real interest rate at which QS=QD. Problem 1 continued on next page... 2 Principles of Macroeconomics: Homework \#2 Problem 1 (continued) 3. what happens to Gallia's saving and investment as ireal drops by 5 percentage-points? What is the effect on the equilibrium market quantity (Q) of loanable funds and why does it make sense? [Hint: You are not required to show mathematical proof.] The fictional country of Gallia has collected GDP data for its current business year. Its economy is closed, i.e., NX=0, and the government is currently running a budget surplus. Gallia's economists have identified the following information: Y=335,000.00C=201,000.00T=30,150.00G=56,950.00 Furthermore, its investment (I) can be described using the following function: I=110,550.003,350.00ireal, where ireal denotes Gallia's real interest rate. We further assume that the real interest rate can be interpreted as a percentage value. [Note that you are expected to show your work. Partial credit will be awarded for incomplete answers.] Given the information above, 1. find private saving, public saving, investment, and national saving. 2. find ireal. That is, the equilibrium real interest rate at which QS=QD. Problem 1 continued on next page... 2 Principles of Macroeconomics: Homework \#2 Problem 1 (continued) 3. what happens to Gallia's saving and investment as ireal drops by 5 percentage-points? What is the effect on the equilibrium market quantity (Q) of loanable funds and why does it make sense? [Hint: You are not required to show mathematical proof.]