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QUESTION
Consider an economy described by the following equations:
Y=C+I+G
Y=500
G=1,000
T=1,000
C=250+0.75(Y-T)
I=1,000-50r
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.
d. Find the new equilibrium rate.
a. Private saving= 750; Public saving=0; National saving=500
b. r=5
c.At the new equilibrium The new Private saving= 1000; Public saving=-250; National saving=750
d.The new equilibrium interest rate=5 (same)