Compute private saving-public saving and national saving

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Reference no: EM131236655

Consider an economy described as follows:

Y = C + I + G (3)

Y = 8, 000 (4)

G = 2, 500 (5)

T = 2, 000 (6)

C = 1000 + 2/3 (Y − T) (7)

I (r) = 1, 200 − 100r (8)

a. Compute private saving, public saving, and national saving.

b. Find the equilibrium real interest rate.

c. Suppose that government expenditures fall by 500: compute the new equilibrium interest rate.

Reference no: EM131236655

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