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The table shows an economy's demand for loanable funds and the supply of loanable funds schedules, when the government's budget is balanced. Loanable funds Loanable
The table shows an economy's demand for loanable funds and the supply of loanable funds schedules, when the government's budget is balanced. Loanable funds Loanable funds Real interest rate demanded supplied (percent per year) (trillions of 2005 dollars) 8.5 5.5 8.0 6.0 7.5 6.5 7.0 7.0 6.5 7.5 6.0 8.0 5.5 8.5a ) Suppose that the government has a budget surplus of $1 trillion. What are the real interest rate, the quantity of investment, and the quantity of private saving? Is there any crowding out in this situation? b ) Suppose that the government has a budget deficit of $1 trillion. What are the real interest rate, the quantity of investment, and the quantity of private saving? Is there any crowding out in this situation? c) Suppose that the government has a budget deficit of $1 trillion and the Ricardo-Barro effect occurs, what are the real interest rate and the quantity of investment
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