The table given below shows an economy's demand for loanable funds and supply of loanable funds schedules when the government's budget is balanced. Real Interest rate (% per year) Loanable fund demanded Loanable fund supplied (Trillian of 2002 $) (Trillian of 2002 $) 8.5 5.5 8.0 6.0 75 6.5 7.0 7.0 6.5 7.0 9. 6.0 8.0 10 5.5 8.5 a. If the government has a budget surplus of $1 trillion, what are the real interest rate, the quantity of investment, and the quantity of private saving? Is there any crowding out in this situation? b. If the government has a budget deficit of $1 trillion, what are the real interest rate, the quantity of investment, and the quantity of private saving? is there any crowding out in this situation? c. If the government has a budget deficit of $1 trillion and the Ricardo-Barro effect occurs, what are the real interest rate and the quantity of investment?

The table given below shows an economy's demand for loanable funds and supply of loanable funds schedules when the government's budget is balanced. Real Interest rate (% per year) Loanable fund demanded Loanable fund supplied (Trillian of 2002 $) (Trillian of 2002 $) 8.5 5.5 8.0 6.0 75 6.5 7.0 7.0 6.5 7.0 9. 6.0 8.0 10 5.5 8.5 a. If the government has a budget surplus of $1 trillion, what are the real interest rate, the quantity of investment, and the quantity of private saving? Is there any crowding out in this situation? b. If the government has a budget deficit of $1 trillion, what are the real interest rate, the quantity of investment, and the quantity of private saving? is there any crowding out in this situation? c. If the government has a budget deficit of $1 trillion and the Ricardo-Barro effect occurs, what are the real interest rate and the quantity of investment?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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