# Savings and Investments

Please help me compile a 2-3 page analysis.

Assume that the officials in Ecoland have compiled the following information about their economy for last year:

Y = 10,000

C = 6,000

T = 1,500

G = 1,700

The government uses the following equation for the investment function:

I = 3,300 Ã¢?" 100r

Where r = equal to EcolandÃ¢??s real interest rate.

Calculate, then explain, the following:

Private saving

Public saving

National saving

Investment

The equilibrium real interest rate

https://brainmass.com/economics/economic-growth/savings-and-investments-329039

#### Solution Preview

Private savings is equal to Y-T-C.

Thus we have: 10000 - 1500 - 6000= 2500

Public savings is equal to T-G (it is the amount by which government income exceeds government spending).

So we have:

1500 - 1700 = -200

National Savings = Investment in a closed economy. Rememeber that investment is represented by "I" in the general GDP equation Y = C + I + G. So we can rearrange it and find:

I = Y - C - G

10000 - 6000 - 1700 = 2300

We could also add public and private savings to find this value.

The equilibrium interest rate can now be found by inserting this value into the equation I = 3,300 - 100r and solving for r. Thus we have:

I = 3,300 - 100r

100r = 3300 - 2300 = 1000

r = 10%

In your analysis, you will consider the changes that need to be made to improve this economy. Notice that interest ...

#### Solution Summary

Improving the economy of Ecoland