1. Business
  2. Economics
  3. the income identity for a closed economy says that y...

Question: the income identity for a closed economy says that y...

Question details

The income identity for a closed economy says that

Y = C+I+G

Assume that in the Economy of Berkeley GDP (Y) is equal to 6,000 and consumption (C) is given by the equation:

C = 600 + 0.6(Y-T)

In addition, investment (I) is given by the equation

I = 2,000 - 100r

where r is the real of interest rate in percent. Taxes (T) are 500 and government spending (G) is also 500. What are the equilibrium values of C, I, and r?

Solution by an expert tutor
Blurred Solution
This question has been solved
Subscribe to see this solution