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Homework answers / question archive /  Economics in Funlandia, a closed economy, have collected the following info about the economy for a particular year: NX = 0     Y = 10,000    C = 6,000         T = 1,500            G = 1,700

 Economics in Funlandia, a closed economy, have collected the following info about the economy for a particular year: NX = 0     Y = 10,000    C = 6,000         T = 1,500            G = 1,700

Economics

 Economics in Funlandia, a closed economy, have collected the following info about the economy for a particular year: NX = 0     Y = 10,000    C = 6,000         T = 1,500            G = 1,700. The economists also estimate that the investment function is: I = 3,300 - 100r; Where r is the country's real interest rate, expressed as a percentage. 

Calculate private saving, private saving, national saving, investment, and the equilibrium real interest, budget balance. 

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Given,

Income (Y) = 10,000

Consumption (C)= 6000

Tax (T)= 1500

Government spending (G)= 1700

Investment function (I) = 3,300- 100r

Private saving= Y- T- C

= 10000- 1500- 6000

= 2500

 

Public saving= T- G

= 1500- 1700

= -200

 

National saving= Y- G- C

= 10000- 1700- 6000

= 2300

 

Investment= National saving= 2300

 

Equilibrium rate of interest;

Investment function (I) = 3,300- 100r

2300= 3300- 100r

100r= 3300- 2300

100r= 1000

r= 1000/ 100

r= .10 or 10%