1. Let the GDP of an island be Y = 5000, its consumption given by the equation C= 1200 + ¾ (Y-T), its investment I = 1500 -50 r where r is the real interest rate, its taxes T = 1500 and its government spending G= 1000. Find

a. Consumption, Investment  and Interest Rate

b. Private Saving, Public Saving and National Saving

c. Is it a closed or open economy? What budget des the government run?

2. Below is the table that provides information on Haiti's inflation rates and unemployment rates over a seven year period.

Years               inflation rate (%)                     unemployment rate (%)

2002                            0.0                                           7.5

2003                            -2.0                                          9.0

2004                            4.0                                           5.0

2005                            6.0                                           4.0

2006                            10.0                                         2.5                  

2007                            2.0                                           6.0

2008                            -4.0                                          10.5

Assuming that Haiti has a population of 1,000,000 over the age of 16 and the labor force participation is 90%, compute

a. The number of workers unemployed in 2002

b. The number of workers employed in 2008.

Assuming that the citizen of Haiti, when trying to determine the inflation rate for the next 12 months, base their calculations solely on the current inflation rate, 

c. During the period of 2003 to 2006, will borrowers be gaining or losing?

d. In 2006, the market interest rate was 12%, calculate the real interest rate

e. Use the aggregate demand-aggregate supply analysis to suggest how the economy has adjusted from 2006 to 2008.