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Unformatted text preview: Assume that output equals full-employment output. (c) Government purchases rise to 1440 (this is an G ↑ ). Show me what happens in the goods market using the Investment/Saving graph. What happens to the market-clearing real interest rate? 3. Suppose that the economy is characterized by the following behavioral equations: 100 150 150 6 . 160 = = = + = T G I Y C d D (a) Solve for equilibrium GDP ( Y ), solve for disposable income ( Y D ), and solve for consumption spending ( C ). (b) Assume that output is equal to 900. Compute total demand. Is it equal to production? Explain. (c) Assume output is equal to 1000. Compute total demand. Is it equal to production? Explain. (d) Assume output is equal to 1000. Compute private saving. Is it equal to investment? Explain. 1...
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This note was uploaded on 01/27/2010 for the course ECON 342 taught by Professor Mcleod during the Spring '09 term at Pennsylvania State University, University Park.
- Spring '09