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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. 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.
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%