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Unformatted text preview: Economics 57 Spring 2007 Your Name MINITEST 1. Consider an economy in long-run equilibrium where planned investment falls by 5 for every 1 percentage-point increase in the interest rate (i.e., - d = -5) and private saving rises by 5 for every 1 percentage point increase in the interest rate (i.e., b = 10 ) . The MPC in this economy is 0.75. a. What is the value of the horizontal shift in national saving from an increase in natural output of 240, 240 Y = ; how much of this shift is public and how much is private saving? (10 points) b. What is the change in the equilibrium real interest rate, the level of investment, and consumption? (10 points) 2. The graph below shows natural real GDP in periods 1 and 2. Locate possible 2....
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This note was uploaded on 03/02/2010 for the course ECON 57 taught by Professor Woglom during the Spring '08 term at UMass (Amherst).
- Spring '08