core: 0 of 5 pts 13 of 15 (12 complete) HW Score: 69.33%, 52 of 75 pts .3 Study

Question

core: 0 of 5 pts 13 of 15 (12 complete) HW Score: 69.33%, 52 of 75 pts .3 Study Plan Problem 9 Question Help The table shows the demand for loanable funds schedule and the private supply of loanable funds schedule when the government's budget is balanced Loanable funds supplied Real Loanable funds interest rate demanded If the Ricardo-Barro effect occurs, and if the govemment's budget becomesa deficit of $3.0 trillion, what is the real interest rate and the quantity of investment? Is there any crowding out in this situation? (percent per year) (trillions of 2009 dollars per year) 6.5 6.0 5.5 5.0 4.5 4.0 3.5 3.5 4.0 4.5 5.0 5.5 6.0 6.5 If the Ricardo-Barro effect occurs, and if the govemment's budget becomes a deficit of $3.0 trillion, the real interest rate is percent a year and the quantity of investment is trillion 6 Answer to 1 decimal place 10

Explanation / Answer

Equilibirum occurs at point where demand id equal to supply. So at real intrest rate 7% demand for lonable funds equal demand for lonable supply.

Investment = 5-2.5 = $2.5 trillion

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