For the economy described below:

c

= 2,600 + 0.8 (y – t) – 10,000r

i p = 2,000 – 10,000r

g = 1,800

nx = 0

t = 3,000

suppose that potential output y* equals 12,000.

a. what real interest rate should the fed set to bring the economy to full employment? you may take as given that the multiplier for this economy is 5.

instruction: enter your response as an integer value.

real rate of interest: %.

b. repeat part a for the case in which potential output y* equals 9,000.