If the governments budget is a deficit of $1 trillion, what are the real interest rate and

Question:

If the government’s budget is a deficit of $1 trillion, what are the real interest rate and investment?

Does any crowding out occur?

Problem 8

The table sets out the data for an economy when the government’s budget is balanced. image text in transcribed

a. Calculate the equilibrium real interest rate, investment, and private saving.

b. If planned saving increases by $0.5 trillion at each real interest rate, explain the change in the real interest rate.

c. If planned investment increases by $1 trillion at each real interest rate, explain the change in saving and the real interest rate.

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Economics

ISBN: 9781292433639

14th Global Edition

Authors: Michael Parkin

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Question Posted: Jan 27, 2024 10:02 PM

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If the governments budget is a deficit of $1 trillion, what are the real interest rate and

Question:

Real interest rate (percent per year) 4567899 10 Loanable funds demanded Loanable funds supplied (trillions of 2012 dollars) 5.5 6.0 6.5 7.0 7.5 8.0 8.5 8.5 8.0 7.5 7.0 6.5 6.0 5.5

Step by Step Answer:

SOLUTION a With a balanced budget investment loanable funds demanded must equal private saving loana...View the full answer

Economics

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