Question

eclass.srv.ualberta.ca Question 2 (15 marks) Consider the following macroeconomic model that describes an Economy: - 1/2 Y =C+I+G Y = 5000 G = T = 1000 C = 250 +0.75(Y-T) 1 = 1000 - 50r a) Calculate the amount of private saving, public saving and the national saving in this economy. b) Calculate the equilibrium interest rate (r). c) Draw a graph containing the saving and investment curves for this economy. Show the market for loanable funds equilibrium d) Suppose G increases to 1250. Calculate the new levels of private saving, public saving and national saving. e) On a new graph, draw the investment curve and the new saving curve. Show the new equilibrium in the market for loanable funds

How to solve this problem especially on the b and d this kind of graph question

Answer 1

Week 52 361-004 THURSDAY a) National Savings = Y-C-G - 5000 - 250 -0.75( 5 000 -10ot ) -l cuo = 750 Private Savings = Y-t-e = Y - T-c - 5000 - 1000 - 3250 = 750 = T-G = 1ooo - 10000 . b) Y = c + I + G 5000 = 250 to 15 (5000 - 1000) tlooo -50p+1000 C Sarings = 750. Iuvestment = 1000-50r ارد d) National Sarings = Y-C-Ga 5000-3200-1250 Private Savines =Y-T-C=5000 - 1000 - 3280 = 750 Publin Sarnas T-G = low t25o = - 250 e 5000 = 3250+ 1000- sort 1250. r = 10% 500 isos NOTES