Given the following scenario, show what will happen to supply, demand, and equil

Question

Given the following scenario, show what will happen to supply, demand, and equilibrium point E in the graph and answer the questions below. If needed, Point E can be moved within the graph to provide greater point accuracy. The government budget deficit increases, changing the equilibrium quantity demanded for financial capital by 3.5 percentage points. What is the new interest rate? Ceteris paribus, private investment would If you need to reset the graph to its original state, click on the graph, and the click on the button that looks like this:

Explanation / Answer

New demand would be 25*103.5% i.e. 25.875. Drag the demand line to 25.875 that will be interest rate. With increased interest rates, private investment decreases.

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