Discover the real interest rate that clears the goods market

Reference no: EM13687272

An economy has full-employment output, Yn, of 6000. Government purchases, G, are 1200. Consumption is C = 3600-2000r + 0.10Y and investment is I = 12-400r, Y is output and r is the real interest rate.

A) Discover an equation relating national saving, S, to r, and Y.

B) Discover the real interest rate that clears the goods market. Suppose that output equals full-employment output (Yf)

C) Government purchases rise to 1440. |How does this increase change the equation describing national saving? Show the change graphically. What happens to the market-clearing real interest rate? (Draw a graph next page.)

Reference no: EM13687272

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