Solution-What are the new equilibrium values for c

What are the new equilibrium values for c

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Reference no: EM132640133

Assume that GDP (YCCYTrIIrrTG) is 6,000. Consumption () is given by the equation = 600 + 0.6( - ) - 100. Investment () is given by the equation = 2,000 - 100, where is the real rate of interest in percent. Taxes () are 500 and government spending () is also 500.

National Saving (S) = Y- C - G

S= Y - [ 600 + 0.6 (Y-T) ] - 500

S= Y- 600 - .06 (Y - 500) - 500

S= Y- 1100 - .06 (Y- 500) - 300

National Savings (S) = .4Y - 800

Current Equilibrium for R= 4

Current Equilibrium for C = 3900

Current Equilibrium for I = 1600

Question 1. If Government spending rises to 1,000 what are the new equilibrium values for C, I, and R?

Question 2. Illustrate what happens to S, I, and r using the loanable funds framework.

Reference no: EM132640133

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What are the new equilibrium values for c

Reference no: EM132640133

Reference no: EM132640133

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