Assume that GDP (Y) is 5,000. Consumption is C=1,000+.3(Y-T). Investment is I=1500-50r, where r is the real interest rate. Taxes (T) are 1,000 and government expenditures (G) are 1,500.

a). Calculate the equilibrium values of C, I, and r.
b). Calculate the equilibrium values of private saving, government saving, and total saving.
c). Now suppose that there is a technological innovation that makes businesses want to invest more, so that the new investment function is I=2,000-50r. Calculate the new equilibrium values of C, I, and r.
d). Calculate the new equilibrium values of private saving, government saving, and total saving.

Solution Preview

Assume that GDP (Y) is 5,000. Consumption is C=1,000+.3(Y-T). Investment is I=1500-50r, where r is the real interest rate. Taxes (T) are 1,000 and government expenditures (G) are 1,500.
Y = 5000
C=1,000+.3(Y-T)
I=1500-50r
T = 1000
G = 1500

a). Calculate the equilibrium values of C, I, and r.

At the equilibrium, Y = C + I + G
or 5000 = 1,000+.3(5000- 1000) + 1500-50r + ...

Solution Summary

This post finds new equilibrium values of private saving, government saving, and total saving.

A tutorial that explains how to calculate the Equilibrium price of a product, cross price elasticity of demand, Income elasticity of Demand and Elasticity of ...

... Find the solution in attached sheet. Show equilibrium price and quantity. ... In the figure, the equilibrium price and quantity are 1 a. P = $6 and Q = 800. ...

... What are the equilibrium price and the equilibrium quantity of lobsters? ... What are the equilibrium price and the equilibrium quantity of lobsters? ...

... 1. What is the equilibrium price? 2. What is the equilibrium quantity? ... Please refer attached file for graph. 1. What is the equilibrium price? ...

3. Demonstrate, using supply and demand analysis, the effect on the equilibrium price and quantity of new hybrid automobiles when the following occurs. ...

Equilibrium Price and Quantity of New Hybrid Automobiles. ... Using graphs, describe the change in the equilibrium price and quantity, and explain your answer. ...

... c. What is the equilibrium quantity in this market? d. What is the equilibrium price in this market? ... d. What is the equilibrium price in this market? ...

... QS= -86 + 90PC- 1.5W + 0.5T + 0.4N Put various values of given parameters QS=-86+90PC-1.5*10+0.5*30+0.4*40=-70+90PC For equilibrium, put QD=QS 70-50PC=-70+ ...

Economics pricing: Equilibrium Price and Quantity in the Market. ... Same thing as a), new equilibrium point has a lower price and a lower quantity demanded. ...