Consider an economy described by the following equations: Y = C + I + G Y = 5,000 G = 1,000 T = 1,000 C = 250 + 0.75(Y −T ) I = 1,000 − 50 r. a. In this economy, compute private saving, public saving, and national saving. b. Find the equilibrium interest rate.

Consider an economy described by the following equations: Y = C + I + G Y = 5,000 G = 1,000 T = 1,000 C = 250 + 0.75(Y −T ) I = 1,000 − 50 r. a. In this economy, compute private saving, public saving, and national saving. b. Find the equilibrium interest rate.

Economics For Today

10th Edition

ISBN:9781337613040

Author:Tucker

Publisher:Tucker

Chapter18: The Keynesian Model

Section: Chapter Questions

Problem 6SQP

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Question

Consider an economy described by the following equations:
Y = C + I + G
Y = 5,000
G = 1,000
T = 1,000
C = 250 + 0.75(Y −T )
I = 1,000 − 50 r.
a. In this economy, compute private saving, public saving, and national saving.
b. Find the equilibrium interest rate.
c. Now suppose that G rises to 1,250. Compute private saving, public saving, and national saving.

Definition Definition Income earned by a government that is not spent on current expenses, but rather saved for future investments or to pay off debts. It is the difference between government revenue and expenditures, and can be positive or negative.

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