Economists in Funlandia, which has a closed economy, have collected the following information about the economy for a particular year:

Y = 12,500

C = 9,000

T = 2,100

G = 2,200

The economists also estimate that the investment function is:

I = 2,000-100r

where r is the country's real interest rate, expressed as a percentage.

Calculate private saving, public saving, national saving, investment and equilibrium real interest rate.

Question

Andreas Pennington

Business

23 July, 22:40

Economists in Funlandia, which has a closed economy, have collected the following information about the economy for a particular year:

Y = 12,500

C = 9,000

T = 2,100

G = 2,200

The economists also estimate that the investment function is:

I = 2,000-100r

where r is the country's real interest rate, expressed as a percentage.

Calculate private saving, public saving, national saving, investment and equilibrium real interest rate.

+2

Answers (1)

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Cason · Answer 1

Solution and Explanation:

private saving = Y - T - C = 12500 - 2100 - 9000

= 1400

Plublic saving = T - G = 2100 - 2200 = - 100

national saving = Y - C - G = 12500 - 9000 - 2200 = 1300

Investment = saving

1400 - 100r = 1300

now, we need to calculate the value of r

-100r = 1300 - 1400

-100r = - 100

r = 1

therefore, Investment (I) = 1400 - 100 (1)

= 1400 - 100

= 1300