Suppose the government budget deficit increases, changing the equilibrium quantity demanded for financial capital by 2.51% of GDP. Show the effect this increase in deficit spending has on supply, demand, and equilibrium point E in the graph and answer the questions. What is the new interest rate? Interest rate: Ceteris paribus, private investment spending decreases. does not change. increases. % Interest rate (%) 10 9 8 7 6 5 4 3 2 1 0 10 5.50 E 30.00 15 20 25 30 35 40 Quantity of financial capital (% of GDP) Supply 45 Demand 50
Suppose the government budget deficit increases, changing the equilibrium quantity demanded for financial capital by 2.51% of GDP. Show the effect this increase in deficit spending has on supply, demand, and equilibrium point E in the graph and answer the questions. What is the new interest rate? Interest rate: Ceteris paribus, private investment spending decreases. does not change. increases. % Interest rate (%) 10 9 8 7 6 5 4 3 2 1 0 10 5.50 E 30.00 15 20 25 30 35 40 Quantity of financial capital (% of GDP) Supply 45 Demand 50
Brief Principles of Macroeconomics (MindTap Course List)
8th Edition
ISBN:9781337091985
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter18: Six Debates Over Macroeconomic Policy
Section: Chapter Questions
Problem 6PA
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Transcribed Image Text:Suppose the government budget deficit increases, changing
the equilibrium quantity demanded for financial capital by
2.51% of GDP. Show the effect this increase in deficit
spending has on supply, demand, and equilibrium point E in
the graph and answer the questions.
What is the new interest rate?
Interest rate:
Ceteris paribus, private investment spending
decreases.
does not change.
increases.
%
Interest rate (%)
10
9
8
7
6
5
3
2
1
0
10
5.50
E
30.00
15
25
30
35
20
Quantity of financial capital (%
40
GDP
Supply
45
Demand
50
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