An economy has government purchases of 1000. Desired national saving and desired investment are given by
S(d) = 200 + 5000r + 0.10Y - 0.20G
I(d) = 1000 - 4000r
When the full-employment level of output equals 5000, then the real interest rate that clears the goods market will be
b. 16.67%.
c. 21.11%.
d. 5.56%.
Answer: D
FIN 201
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