The table sets out the data for an economy when the government's budget is balanced. The quantity of loanable funds demanded increases by $0.5 billion at each real interest rate and the quantity of loanable funds supplied increases by $1.5 billion at each interest rate. If, at the same time the government budget becomes a deficit of $2.0 billion, what are the real interest rate and investment? Does any crowding out occur? >>> Answer to 1 decimal place.

Exploring Economics
8th Edition
ISBN:9781544336329
Author:Robert L. Sexton
Publisher:Robert L. Sexton
Chapter21: Financial Markets, Saving, And Investment
Section: Chapter Questions
Problem 9P
icon
Related questions
Question
The table sets out the data for an economy when the government's budget is balanced.
K
The quantity of loanable funds demanded increases by $0.5 billion at each real interest rate and
the quantity of loanable funds supplied increases by $1.5 billion at each interest rate.
If, at the same time the government budget becomes a deficit of $2.0 billion, what are the real
interest rate and investment?
Does any crowding out occur?
>>> Answer to 1 decimal place.
The real interest rate is percent a year.
Transcribed Image Text:The table sets out the data for an economy when the government's budget is balanced. K The quantity of loanable funds demanded increases by $0.5 billion at each real interest rate and the quantity of loanable funds supplied increases by $1.5 billion at each interest rate. If, at the same time the government budget becomes a deficit of $2.0 billion, what are the real interest rate and investment? Does any crowding out occur? >>> Answer to 1 decimal place. The real interest rate is percent a year.
Real
interest rate
(percent
per year)
4
5
6
7
8
9
10
Loanable funds Loanable funds
demanded
supplied
(billions of 2007 dollars)
7.0
6.5
6.0
5.5
5.0
4.5
4.0
5.0
5.5
6.0
6.5
7.0
7.5
8.0
Transcribed Image Text:Real interest rate (percent per year) 4 5 6 7 8 9 10 Loanable funds Loanable funds demanded supplied (billions of 2007 dollars) 7.0 6.5 6.0 5.5 5.0 4.5 4.0 5.0 5.5 6.0 6.5 7.0 7.5 8.0
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 3 steps

Blurred answer
Knowledge Booster
Market for loanable funds
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Exploring Economics
Exploring Economics
Economics
ISBN:
9781544336329
Author:
Robert L. Sexton
Publisher:
SAGE Publications, Inc
MACROECONOMICS
MACROECONOMICS
Economics
ISBN:
9781337794985
Author:
Baumol
Publisher:
CENGAGE L
Brief Principles of Macroeconomics (MindTap Cours…
Brief Principles of Macroeconomics (MindTap Cours…
Economics
ISBN:
9781337091985
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Principles of Macroeconomics (MindTap Course List)
Principles of Macroeconomics (MindTap Course List)
Economics
ISBN:
9781305971509
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Principles of Macroeconomics (MindTap Course List)
Principles of Macroeconomics (MindTap Course List)
Economics
ISBN:
9781285165912
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Principles of Economics, 7th Edition (MindTap Cou…
Principles of Economics, 7th Edition (MindTap Cou…
Economics
ISBN:
9781285165875
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning