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ECONOMICS: Equilibrium Interest Rate

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 - 100r

Where r = equal to Ecoland's real interest rate.

Calculate, then explain, the following:

Private saving
Public saving
National saving
The equilibrium real interest rate

Solution Summary

The equilibrium interest rate is solved by determining private saving, public saving, national saving, investment given the investment function and assuming the economy is closed (no imports nor exports).