Real interest rate

(percent peryear)

Loanable funds demanded

(trillionsof 2009dollars)

Loanable funds supplied

(trillionsof 2009dollars)

2

8

6

3

7

7

4

6

8

5

5

9

6

4

10

7

3

11

8

2

12

1. The table above sets out the data for an economy when thegovernment's budget is balanced.
2. Calculate the equilibrium real interestrate, equilibrium investment, and private saving. (2 Marks)If planned saving decreases by$2 trillion at each real interestrate

a.which curve will shift and in which direction?

b.what is the equilibrium real interest rate?

c.What is the equilibrium quantity of loanable funds?

3 - Starting from original equilibrium,if planned investment increases by$6 trillion at each real interestrate,

a.which curve will shift and in which direction?

b.what is the equilibrium real interest rate? (1 Mark

c.What is the equilibrium quantity of loanable funds?