4) 1 01-011 3heet Uu 23-117 cel Matt Robinson -- × Isat DW Page Larot Formus at

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4)

1 01-011 3heet Uu 23-117 cel Matt Robinson -- × Isat DW Page Larot Formus at Revic ViewTel we what you mant to do Linked Call ormatthng ab e pboard 61 4. Government Crowding Out (5) Suppose the equations for Saving (S) & Investment(I) have been found to be S 2000*r 6000-1000*t A. Find Equilibrium & show it by bolding [B] the row. (2) 65 Saving Saving Investment 0.00 0.50 1.00 2.00 2.50 3.00 3.50 4.00 4.50 5.00 5.50 6.00 6.50 7.00 7.50 73 74 76 70 81 a5 B. By what % will equilibrium real interest rate change if Saving is reduced to the following by govemment borrowing ' & Investment stayed the same. 87 S-20001000*r Problems Mini-tutcriel 1 E O lype here to search

Explanation / Answer

At equilibirum S= I

2000*r = 6000- 1000*r

r = 2

Now

S= -2000+ 1000*r

-2000+ 1000*r = 6000- 1000*r

2000*r = 8000

r = 4

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