We have the following information about a closed economy: GDP is $200 (all dollar amounts are...

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We have the following information about a closed economy: GDP is $200 (all dollar amounts are in billions), private savings $55, government purchases $35, taxes $25, and that there has been no transfer payments by the government. a) Calculate the following about this economy: i) consumption, ii) investment, iii) government budget deficit, and, iv) national savings. (6 marks) b) Suppose the investment in this economy (I, in billion dollars) is related to the interest rate (r) by I=61 - 200 r, and suppose further that the loanable fund market has been in equilibrium. What is the interest rate in this economy? (4 marks) c) Suppose the government subsequently reduces the budget deficit. Explain in words and with the help of a diagram what happens in the loanable fund market, i.e. how the interest rate and amount saved and invested change as a result. (8 marks) We have the following information about a closed economy: GDP is $200 (all dollar amounts are in billions), private savings $55, government purchases $35, taxes $25, and that there has been no transfer payments by the government. a) Calculate the following about this economy: i) consumption, ii) investment, iii) government budget deficit, and, iv) national savings. (6 marks) b) Suppose the investment in this economy (I, in billion dollars) is related to the interest rate (r) by I=61 - 200 r, and suppose further that the loanable fund market has been in equilibrium. What is the interest rate in this economy? (4 marks) c) Suppose the government subsequently reduces the budget deficit. Explain in words and with the help of a diagram what happens in the loanable fund market, i.e. how the interest rate and amount saved and invested change as a result. (8 marks)