Here is the situation: Government Spending (G) = 1000, National Output (GDP or Y) = 5000. Savings (desired) = 200+5000r+.1Y-.2G and Investment = 1000-4000r. To calculate R (interest rate) S=I so R=.055 or 5.5%. I need to calculate desired savings and desired investment...i can plug in r to both equations and get 780 & 225 however that doesnt create equilibrium. I can use the formula Y - C - G = I to calculate comsumer spending but I don't know what good that does. Any advice would be awesome. The question reads "What are the levels of desired national savings and desired investment in the equilibrium?" So maybe 225 and 780 isn't wrong?
2007-02-13 14:52:53 · 2 answers · asked by Alex F 2 in Education & Reference ➔ Homework Help
I dont know, I got an A in macro, but I cant remember.
From your equation.
200 (wherever this came from) + 5000 (.055) +.1(5000) - .2 (1000)...or
200 + 275 + 500 + 200 = 1175
1000-4000 (.055)
1000-220 = 780
How are you computing the desired savings? From your given equation that should be the same..but hopefully you can figure it all out since i cant ...
2007-02-13 15:21:36 · answer #1 · answered by Anonymous · 0⤊ 0⤋
Maybe You are right after all. But look at the problem again.
2007-02-13 22:57:51 · answer #2 · answered by Ashleigh 7 · 0⤊ 0⤋