In a closed economy the consumption function represented by C = 4000 - 4000r + 0.20Y and investment function represented by I = 2400 - 4000r. Where, Y is output and r is real interest rate. Given G = 2000.calculate the following:
a. Real interest rate that clears the goods market when Y = 10,000 and Y = 10,200.
b. If G rises to 2400 and Y = 10,000, what will be the real interest rate that clears the goods market.
c. Calculate the autonomous consumption and MPS.
d. Suppose you introduce a tax element and the resulting new consumption function will C = 4000 - 4000r + 0.20 (Y - T) and T = 2000, what will be the real interest rate that clears the goods market at G = 2000 and Y = 10,000.
e. Determine autonomous investment and marginal propensity to invest.