Conclude autonomous investment and marginal propensity

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Reference no: EM1367717

Q. In a closed economy consumption function represented by C = 4000 - 4000r + 0.20Y and investment function represented by I = 2400 - 4000r. Where, Y is output and r is real interest rate. Given G = 2000.Estimate following:

a. Real interest rate that clears goods market when Y = 10,000 and Y = 10,200.

b. If G rises to 2400 and Y = 10,000, Illustrate what will be real interest rate that clears goods market.

c. Estimate autonomous consumption and MPS.

d. Assume you introduce a tax element and resulting new consumption function will C = 4000 - 4000r + 0.20 (Y - T) and T = 2000, Illustrate what will be real interest rate that clears goods market at G = 2000 and Y = 10,000.

e. Conclude autonomous investment and marginal propensity to invest.

Reference no: EM1367717

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