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What is the new equilibrium real interest rate

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An economy has full-employment output of 6,000. Government purchases, G, are 1,200. Desired consumption and desired investment are:

Cd = 3600-2000r+0.10Y, and ld = 1200-4000r,

Where Y is output and r is the real interest rate.

Assuming that output equals full-employment output, if government purchases rises to 1,440, what is the new equilibrium real interest rate? Round your answer to at least 3 decimal places.

Reference no: EM132667878

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