10. Work It Out. Consider an economy described as follows: Y = C+I+G Y = G = T = C = I = 1,200 100 r. 8,000 2,500 2,000 1000+2/3 (Y - T) - a. In this economy, compute private saving, public saving, and national saving. b. Find the equilibrium interest rate.

10. Work It Out. Consider an economy described as follows: Y = C+I+G Y = G = T = C = I = 1,200 100 r. 8,000 2,500 2,000 1000+2/3 (Y - T) - a. In this economy, compute private saving, public saving, and national saving. b. Find the equilibrium interest rate.

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter8: Savings,investment And The Financial System

Section: Chapter Questions

Problem 4PA

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Concept explainers

Public Saving

Public saving deals with the amount which has been in excess after meeting all the obligatory expenses and investment of the government. Taxes are collected by the government to meet its day-to-day expenditures. The obligatory expenses include all those expenses which are mandatory for the government. It cannot be avoided as it is inevitable.

Question

10. Work It Out. Consider an economy described as follows:
Y = =
Y
G
T
1
1
Cam
C =
I
C+I+G
8,000
2,500
2,000
1000+2/3 (Y - T)
1,200 100 r.
a. In this economy, compute private saving, public saving, and national
saving.
b. Find the equilibrium interest rate.
c. Now suppose that G is reduced by 500. Compute private saving, public
saving, and national saving.
d. Find the new equilibrium interest rate.

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Step 1: a. Compute Private Saving, Public Saving, and National Saving

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Step 2: c. New Values with Reduced Government Spending

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