Answered: Desired consumption, desired…

Macroeconomics: Private and Public Choice (MindTap Course List)

16th Edition

ISBN:9781305506756

Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Chapter11: Fiscal Policy: The Keynesian View And Historical Development Of Macroeconomics

Section: Chapter Questions

Problem 11CQ

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Desired consumption, desired investment, and government spending in a closed economy are

C^d = 360 - 200r + 0.1Y^d

I^d = 120 - 400r

G = 120

Find an equation for desired national saving, S^d in terms of output Y and the real interest rate r.

What value of the real interest rate clears the goods market when Y = 550? When Y = 600? When Y = 650? Use the goods market equilibrium condition to derive the IS curve

Definition Video Formula Definition Phenomenon in which market supply and demand balance each other. Market equilibrium is the economic state in which the market demand curve intersects the market supply curve, giving us the equilibrium price and equilibrium quantity for which a commodity can be sold and purchased in an economy. When market equilibrium is achieved, it suggests that all resources have been allocated efficiently and that there is just a distribution of income and resources in the economy. Video Formula

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