TABLE OF CONTENTS

Question 1 of 4

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Consider an economy described as follows:
Y = C + I + G.
Y = 5,000.
G = 1,000.
T = 1,000.
C = 250 + 0.75(Y T).
I = 1,000 – 50 r.

In this economy, compute private saving, public saving, and national saving.

Private Saving =

Public Saving =

National Saving =

Review text pages 69-73 for a discussion of the determinants of saving in the long-run model.
Review text pages 69-73 for a discussion of the determinants of saving in the long-run model.

Consider an economy described as follows:
Y = C + I + G.
Y = 5,000.
G = 1,000.
T = 1,000.
C = 250 + 0.75(YT).
I = 1,000 – 50 r.

Find the equilibrium interest rate.

The equilibrium interest rate is equal to .

Review text pages 68-71 and Figure 3-8 for discussion of how the equilibrium interest rate is determined in the long-run model.
Review text pages 68-71 and Figure 3-8 for discussion of how the equilibrium interest rate is determined in the long-run model.

Consider an economy described as follows:
Y = C + I + G.
Y = 5,000.
G = 1,000.
T = 1,000.
C = 250 + 0.75(YT).
I = 1,000 – 50 r.

Now suppose that G rises to 1,250. Compute private saving, public saving, and national saving.

Private Saving =

Public Saving =

National Saving =

Review text pages 69-73 for a discussion of the determinants of saving in the long-run model.
Review text pages 69-73 for a discussion of the determinants of saving in the long-run model.

Consider an economy described as follows:
Y = C + I + G.
Y = 5,000.
G = 1,000.
T = 1,000.
C = 250 + 0.75(YT).
I = 1,000 – 50 r.

Now suppose that G rises to 1,250. Find the new equilibrium interest rate.

The equilibrium interest rate is equal to .

Review text pages 69-73 and Figure 3-10 for discussion of how the equilibrium interest rate changes when public saving changes.
Review text pages 69-73 and Figure 3-10 for discussion of how the equilibrium interest rate changes when public saving changes.