Scenario 18-2.Assume the following information for an imaginary,closed economy.
GDP = $200,000; consumption = $120,000;
government purchases = $35,000; and taxes = $25,000.
-Refer to Scenario 18-2.Suppose,for this economy,the relationship between the real interest rate,r,and investment,I,is given by the equation I = 69,000 - 3,000r.(If,for example,r = 10,this means that the real interest rate is 10 percent.)The equilibrium real interest rate for this economy is

Question

Quizplus · Accepted Answer

To find the equilibrium real interest rate, we need to use the equation for equilibrium in a closed economy: Y = C + I + G, where Y = GDP. Plugging in the given values, we get:

200,000 = 120,000 + (69,000 - 3,000r) + 35,000

Simplifying and solving for r, we get:

r = 8%

Therefore, the equilibrium real interest rate for this economy is 8%, which corresponds to answer choice C.