Economists in Funlandia, a dosed economy, have collected the following information about the economy for a particular year: Y = 10 000 C = 6000 T =

Economics Feb 23, 2021

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.

Expert Solution

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%

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