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Desired consumption and investment are Cd = 4000 - 4000 r + 0.20 Y Id = 2400 - 4000 r.
As usual, Y is output and r is the real interest rate. Government purchases, G, are 2000.
A). Find an equation relating desired national saving, Sd, to rand Y.
B). What value of the real interest rate clears the goods market when Y = 10,000? Use both forms of the goods market equilibrium condition. What value of the real interest rate clears the goods market when Y = 1O,200?
C). Graph the IS curve.
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