Y = 2100
Cd = 100 + .75 (Y – T) – 2000 r
T = 500
G = 400
Id = 600 – 3000 r
- Find the equilibrium real interest rate?
- What is the equilibrium desired national saving amount?
i. How much is desired private saving?
ii. How much is government saving?
- What is the equilibrium desired investment?
- What is the desired consumption?
- Draw the graph of the goods market equilibrium (Sd, Id, r). Label completely, including equilibrium amounts.
- Show the change on the graph if taxes are decreased for both households and firms.
- How do desired saving amount and desired investment amount change? For each state if it increases, decreases, does not change, or is ambiguous?