For this question, youll type some equations and numeric answers into the boxes. Your work for parts A and B should be written or typed on a separate sheet/in a separate file and then uploaded. On your work, clearly indicate which is part (a) and which is part (b). We think you only need 1 page for your work, but if it rolls to a second page thats ok.. Suppose the economy can be defined by the following (all units are billions of $ per year)

C = 1,000 + 0.8YD

TA = 500 + 0.3Y

TR = 500 + 0.1Y

I = 2,000 - 10,000r G = 3,000

GX = 4,000 - 20,000r

IM = 1,000 + 0.24Y

potential output Y* = 14,000

A. Using the Y=AD approach, solve for the equilibrium value of the real interest rate in the economy. In gradescope, youll type in your starting equation, and your result. On your uploaded work, youll show all the steps.

B. Now, use those same equations to derive equations for saving and for investment. Use those saving and investment equations to solve for the equilibrium value of the real interest rate. In gradescope, youll type in the equations for household saving, government saving, and foreign saving, and your result. On your uploaded work, youll show all the steps.

C. Draw and upload two graphs that show the determination of the equilibrium real interest rate. In one graph, use the AD and Y equations. In the second graph, use the S and I equations