940, 1000(d) 1080, 540(e) 2, 1084. Consider a closed economy with the following information given. We know that the total pro-duction of this economy is exactly 2000 units (Y=2000). Government expenditure is alsoknown and is 320 units (G= 320). The consumption expenditure function is:C = 20+0.8 x (YT),hence autonomous consumption is 20 units, while further consumption is a positive function ofthe disposable income (Y-T). Tax is a positive function of total incomeT = 0.15 x Y.Finally, the investment function is given as I =500 - 40 xr,hence autonomous investment is 500 units, while further investment is a negative function of thereal interest rate. Calculate the real interest rate in the equilibrium.5. Calculate the levels of consumption (C) and investment (I) based on your answers to problem(4).6. Now calculate private and government savings, based on your answers to problem (4) and (5).Show that total savings in the economy is equal to total investment at the market equilibriumreal interest rate.>>>

Above question provides a scenario of goods market equilibrium with a closed economy. Equilibrium…

-. Consider a closed economy with the following information given. We know that the total pro- expenditure is also duction of this economy is exactly 2000 units (Y= 2000). Government known and is 320 units (G= 320). The consumption expenditure function is:

-. Consider a closed economy with the following information given. We know that the total pro- expenditure is also duction of this economy is exactly 2000 units (Y= 2000). Government known and is 320 units (G= 320). The consumption expenditure function is:

Economics For Today

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Chapter18: The Keynesian Model

Section: Chapter Questions

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Question

940, 1000
(d) 1080, 540
(e) 2, 108
4. Consider a closed economy with the following information given. We know that the total pro-
duction of this economy is exactly 2000 units (Y=2000). Government expenditure is also
known and is 320 units (G= 320). The consumption expenditure function is:
C = 20+0.8 x (YT),
hence autonomous consumption is 20 units, while further consumption is a positive function of
the disposable income (Y-T). Tax is a positive function of total income
T = 0.15 x Y.
Finally, the investment function is given as

I =
500 - 40 xr,
hence autonomous investment is 500 units, while further investment is a negative function of the
real interest rate. Calculate the real interest rate in the equilibrium.
5. Calculate the levels of consumption (C) and investment (I) based on your answers to problem
(4).
6. Now calculate private and government savings, based on your answers to problem (4) and (5).
Show that total savings in the economy is equal to total investment at the market equilibrium
real interest rate.
>>>

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