Question

Y= 10,000 c= 6,000 t= 1,500 g= 1,700 the economists also estimate that the investment function is: i= 3,300- 100r where is the country's real interest rate, expressed as a percentage. calculate private saving, public saving, national saving, investment, and the equilibrium real interest rate.

Answer 1

Private Savings
`p^(S)` = Y-T-C $(10,000- $1500)- ($6000)= $2500

Public/ Government Savings=
`S^(G)`= T-G ($1500-$1700= $-200

National/Total Savings= Y-C-G ($10,000- $6000)- ($1700)= $2300
*Note that national savings is also a sum of private+ public savings.

National Savings is equal to investment so that means
Investment= $2300
Equilbrium real interest rate- 3300-100R= 2300
R=10%