Consider the following simple model, where a variable with a barunder the bottom of it means the variable isfixed.
Y = F( K, L)
C = C(Y - T), C' (Y - T) <0
G = G =T
I = I(r),I'(r)<0
1. define total saving, private savingand public saving. In a graph, descibe the equilibrium in the market for funds.
2. suppose that consumers suddenlywanted to increase their spending, and decrease their savings.Desrive what will happen to output, consumption, governmentspending, taxes, investment and the real interest rate.