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An economy has full-employment output of 5000. Government purchases are 1000. Desired consumption and desired investment are given by
Cd = 3000 - 2000r + 0.10Y
Id = 1000 - 4000r
where Y is output and r is the expected real interest rate. The real interest rate that clears the goods market is equal toA. 25.00%.B. 8.33%.C. 2.50%.D. 1.25%.
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