ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Equilibrium in the financial capital market occurs at an interest rate of 6 % GDP is $500 billion, and the budget deficit is $15.5 billion. GDP is expected to increase by
$100 billion, so the budget deficit will be $37.2 billion. Assume that an increase in the budget deficit by 1% of GDP will cause an increase in the long-term interest rate
of 0.5 percentage points.
Determine the long-term interest rate. Throughout your calculations, round to one decimal place if necessary, and enter your answer in the box below.
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Transcribed Image Text:Equilibrium in the financial capital market occurs at an interest rate of 6 % GDP is $500 billion, and the budget deficit is $15.5 billion. GDP is expected to increase by $100 billion, so the budget deficit will be $37.2 billion. Assume that an increase in the budget deficit by 1% of GDP will cause an increase in the long-term interest rate of 0.5 percentage points. Determine the long-term interest rate. Throughout your calculations, round to one decimal place if necessary, and enter your answer in the box below.
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