7. Suppose that you have an economy where the government does not have a decit and the demand for loanable funds and supply of loanable funds are as follows (if r = 0.2, it is an interest rate of 20%): Demand: r = 0.2 - 0.0001Q Supply: 1' = 0.0001Q a. Graph the demand and supply ofloanable funds b. What is the equilibrium interest rate and equilibrium quantity in the market? Interest rate: Quantity: c. Now the government has a budget decit that causes the supply of loanable funds to change to r = 0.01 + 0.0001Q. What is the new equilibrium interest rate and quantity? Interest rate: Quantity: d. Is there crowding out in this economy with the new decit? If so, calculate the amount that private investment is being crowded out and explain why it is happening. Crowding out: 8. Do the following events have their inialimpacton aggregate demand, long run aggregate supply, or short run aggregate supply? Do the curves shift to the right or to the left? Show, using a graph for each question. a. The new government in Canada increases income taxes. AD/AS/LRAS: Equilibrium Price: Equilibrium Quantity: b. There has been an increase in investment in postsecondary education in Canada AD/AS/LRAS: Equilibrium Price: Equilibrium Quantity: c. Canada experiences downward pressure on nominal wages AD/AS/LRAS: Equilibrium Price: Equilibrium Quantity: 5. Suppose that you have the following information for an economy. GDP = $1000, C = $800, G = $100, X = $50,1M = $30, T = $50, and TR = $20 a) What is investment in this economy? Investment: b) What is private savings? Private Savings: c) What is government savings? Government Savings: d) What is the capital inow in this economy? I Capital inow: 6. The following T-account shows the assets and liabilities of all banks in Canada. The reserve ratio is 10%. All financial transactions occur within the banking system. No one holds cash. Assets Liabilities Actual reserves $200 million Deosits $1000 million Loans $700 million Bonds $100 million a) What is the amount oftotal desired reserves? What is the amount of excess reserves? Required Reserves: Excess Reserves: b) What will be the final T-account after all of the excess reserves are loaned out? Actual reserves Deposits Loans c) After all the multiplier processes have taken place, what will be the change in money supply? Change in MS 8 4. The table below gives data for a small economy in which there are two final goods included in GDP: good X and good Y. Given the following data, answer the following questions. Show all your work, clearly indicating the operations you are conducting. Production Prices 2016 2015 5 X 30 20 $50 Y 20 30 $100 $110 a. Calculate nominal GDP for each of these years. Nominal GDP 2015: Nominal GDP 2016: b. Calculate real GDP for each for each of these years. Use 2015 as the base year. Real GDP 2015: Real GDP 2016: c. Calculate the percentage change in real GDP from 2015 to 2016. Percentage Change: (1 Consider again the above table. Using 2015 as the base year, calculate a consumer price index for each of the two years. CPI 2015: CPI 2016