Fill This Form To Receive Instant Help
Fill This Form To Receive Instant Help
Homework answers / question archive / Economists in Funlandia, a dosed economy, have collected the following information about the economy for a particular year: Y = 10 000 C = 6000 T =
Economists in Funlandia, a dosed economy, have collected the following information about the economy for a particular year:
Y = 10 000 C = 6000 T = .1500 G = .1700
The economists also estimate that the investment function is: 1 = 3300 -100r where r is the country's real interest rate, expressed as a percentage. Calculate private saving, public saving, national saving, investment, and the equilibrium real interest rate.
Computation of Private Savings:
Private savings = Y-T-C
= 10000-1500-6000
= 2500
Computation of Public Savings:
Public Savings = T- G
= 1500-1700
= -200
Computation of National Savings:
National Savings = Y-C-G
= 10000-6000-1700
= 2300
Investment=2300
Computation of Real Interest Rate:
Real Interest Rate = 10%
Investment = Savings
2300 = 3300 - 100r
-1000 = -100r
r = 10%
So, Real Interest Rate = 10%
