Suppose the following equations describe the relationship between the long-run shares of spending in GDP and the interest rate (R), measured in decimal fractions (that is, R = 0.05 means that the interest rate is 5 percent).

Equations: C/Y* = 0.7 – 0.2(R - .05) and I/Y* = 0.2 – 0.8(R - .05)

X/Y* = .0 – 0.95(R - .05) and G/Y* = .2

Use algebra to determine the values of the interest rate and the long-run shares of spending in GDP.

R =

C percentage =
%

I percentage =
%

X percentage =
%

G percentage =
%