Question: C=3 MPC=0.6 I = 5 C = 0.08 G = 2 D = 0.4 T = 2 X = 0.1 NX = 1 F =

C=3	MPC=0.6
I = 5	C = 0.08
G = 2	D = 0.4
T = 2	X = 0.1
NX = 1	F = 0

Using the values in the table above, answer the following questions. (Show your work) (a) Derive the expression for the IS curve (i.e., Y = f(r)) (b) If the real interest rate is 4%, what is the value of equilibrium real GDP (Y)? (c) If the real interest rate equals 4%, calculate equilibrium values for the following:

i. Consumption (C) = ii. Investment (I) = iii. Net Exports (NX) = (d) Use the values in (c) above to confirm that the goods market is in equilibrium (hint: Goods market equilibrium: Y = C + I + G + NX)

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