The table below depicts the level of gross investment at various interest rates in the economy. Year 1 Gross Year 2 Gross Real Interest Investment Demand Investment Demand Rate 70 $25,000 $15,000 50,000 75,000 100,000 30,000 6. 45,000 60,000 75,000 4. 3 125,000 Instructions: Enter your answers as a whole number. a. In year 1, if the real interest rate is 5%, what will gross investment be in the economy? %24 b. In year 2, a recession reduces investment demand. If the real interest rate remains at 5%, what will gross investment be in the economy? 24 c. Suppose the government enacts expansionary fiscal policy and funds this action through borrowing. Real interest rates increase 7% as a result of this action. What will the new level of gross investment be in year 2? 2$ d. The change in gross investment due to increased government borrowing is known as: O investment loss. O an economic contraction. O crowding out.

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