Identify the real interest rate, investment, and private saving.

Question

Want to see the full answer?

Answer 1

Question

Chapter 24, Problem 12SPA

To determine

Identify the real interest rate, investment, and private saving.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

The table sets out the data for an economy when the government's budget is balanced. Real Loanable funds Loanable funds interest rate If the government's budget becomes a deficit of $1.0 billion, what are the real demanded supplied (percent per year) interest rate and investment? (billions of 2007 dollars) 4 7.5 4.5 Does crowding out occur? 7.0 5.0 6.5 5.5 ..... If the government's budget becomes a deficit of $1.0 billion, the real interest rate is 7 6.0 6.0 percent a year and the quantity of investment is $ >>> Answer to 1 decimal place. billion. 8 5.5 6.5 9. 5.0 7.0 10 4.5 7.5

The table sets out the data for an economy when the government's budget is balanced. The quantity of loanable funds demanded increases by $1.5 billion at each real interest rate and the quantity of loanable funds supplied increases by $0.5 billion at each interest rate If, at the same time the government budget becomes a deficit of $1.0 billion, what are the real interest rate and investment? Does any crowding out occur? >>> Answer to 1 decimal place The real interest rate is Investment is $ billion. There OA. is, HI percent a year crowding out in this situation because OB. is no the deficit increases the real interest rate, which decreases investment investment is $7.0 billion Real interest rate (percent per year) 4 5 6 7 8 9 10 Loanable funds Loanable funds demanded supplied (billions of 2007 dollars) 8.0 7.5 7.0 6.5 6.0 5.5 5.0 5.0 5.5 6.0 6.5 7.0 7.5 8.0

The current market rate of interest is 10 percent. At that rate of interest, businesses borrow $300 billion per year for investment and consumers borrow $50 billion per year to finance purchases. The government is currently borrowing $150 billion per year to cover its budget deficit. a. Derive the market demand for loanable funds, and show how investors and consumers will be affected if the budget deficit increases to $250 billion per year. Draw a graph to show your conclusion. b. Assuming taxpayers do not anticipate an increase in the future market rate of interest due to the increase in budget deficit, show the impact of the increase in the budget deficit on the market for loanable funds.