ECONOMICS: Equilibrium Interest Rate
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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
Investment
The equilibrium real interest rate
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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).
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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:
We know that Y = C + S + ...
Purchase this Solution
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