ADDITIONAL EXERCISES.
1.
Consider the following long-run model:
Real GDP (Y) = 2,000 Consumption (C) = 300 + 0.6 (Y-T)
Investment (I) = 500 -30r  where r is the real interest rate.
Taxes (T) are 450 and government spending (G) is 400
Compute consumption, private savings, public savings, national savings, investment, the real interest rate.

2. Use the same model as in (1), except C= 200 + .6(Y-T)
Compute consumption, private savings, public savings, national savings, investment, the real interest rate.

3.  Use the model in (1) and compute the new equilibrium interest rate
when government expenditure decreases by 100 (i.e. new G=300).

4.  Use the same model as in (1), but now assume C= 200 + .6(Y-T) - 5r
Compute consumption, private savings, public savings, national savings, investment, the real interest rate.

5. Use the model in (4) and compute the new equilibrium interest rate
when government expenditure decreases by 100 (i.e. new G=300).

ANSWERS:
1.  C=1230, Spr=320, Spu=50, Snat=370, I=370, r=4.33%
2.  C=1130, Spr=420, Spu=50, Snat=470, I=470, r=1.0%
3.  C=1230, Spr=320, Spu=150, Snat=470, I=470, r=1.0% (reduction in r by 3.33 percentage points compared to (1)).
4.  C=1125.7, Spr=424.3, Spu=50, Snat=474.3, I=474.3, r=0.86%
5.  C=1140.0, Spr=410, Spu=150, Snat=560.0, I=560.0, r=-2.0% (reduction in r by 2.86 percentage points compared to (4)).  NOTE: The change in r is now LESS than in (3). See if you can illustrate this.