Question: Question 2 { 16 points, 4 points each). Assume that GDP (1') is 5,000. Consumption (C) is given by the equation C = 1,000 +

 Question 2 { 16 points, 4 points each). Assume that GDP

(1') is 5,000. Consumption (C) is given by the equation C =

Question 2 { 16 points, 4 points each). Assume that GDP (1') is 5,000. Consumption (C) is given by the equation C = 1,000 + 0.3(Y T}. Investment (I) is given by the equation I = 1,500 503*, where r is the real interest rate in percent. Taxes {T} are 1,000 and government spending (G) is 1,500. a. What are the equilibrium values of C, I, and r? b. What are the values of private saving, public saving, and national saving? c. Now assume there is a technological innovation that makes business want to invest more. It raises the investment equation to I = 2,000 501'. What are the new equilibrium values of C, I, and r? d. What are the new values of private saving, public saving, and national saving

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