4.Assume that GDP (
) is 5,000. Consumption (
is given by the equation
= 1,000 + 0.3(
) is given by the equation
= 2000 -50
is the real interest rate in percent.
) are 1,000 and government spending (
) is 1,500. (20%, each part 5%)
What are the equilibrium values of
What are the values of private saving, public saving, and national saving?
Now assume that the government has a tax cut to reduce Taxes (
) to 500. What are the new
equilibrium values of
Graphically illustrate how the above change in government policy would affect the loanable
funds market. Be sure to label: i. the axes; ii. the curves; iii. the initial equilibrium values; iv.
the direction curves shift; and v. the terminal equilibrium values.