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 O A. is, percent a year. crowding out in this situation because the deficit increases the real interest rate, which decreases investment OB. is no; investment is $7.0 billion Real interest rate (percent per year) 4 5 6 7 8 9 10 Loanable funds Loanable funds supplied demanded (billions of 2007 dollars) 8.0 7.5 7.0 6.5 6.0 5.5 5.0 7766518 5.0 5.5 6.0 6.5 7.0 7.5 8.0
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 O A. is, percent a year. crowding out in this situation because the deficit increases the real interest rate, which decreases investment OB. is no; investment is $7.0 billion Real interest rate (percent per year) 4 5 6 7 8 9 10 Loanable funds Loanable funds supplied demanded (billions of 2007 dollars) 8.0 7.5 7.0 6.5 6.0 5.5 5.0 7766518 5.0 5.5 6.0 6.5 7.0 7.5 8.0
Chapter11: Managing Aggregate Demand: Fiscal Policy
Section: Chapter Questions
Problem 1DQ
Related questions
Question
![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](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F64dbc75c-ec03-4124-8bf2-313b0dd5b6c4%2F9a6832b6-81b2-4a8a-8bd7-80174acd3a59%2Fx90af7e_processed.jpeg&w=3840&q=75)
Transcribed Image Text: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
Expert Solution
![](/static/compass_v2/shared-icons/check-mark.png)
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 4 steps
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
![MACROECONOMICS](https://www.bartleby.com/isbn_cover_images/9781337794985/9781337794985_smallCoverImage.gif)
![Principles of Macroeconomics (MindTap Course List)](https://www.bartleby.com/isbn_cover_images/9781285165912/9781285165912_smallCoverImage.gif)
Principles of Macroeconomics (MindTap Course List)
Economics
ISBN:
9781285165912
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
![Brief Principles of Macroeconomics (MindTap Cours…](https://www.bartleby.com/isbn_cover_images/9781337091985/9781337091985_smallCoverImage.gif)
Brief Principles of Macroeconomics (MindTap Cours…
Economics
ISBN:
9781337091985
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
![MACROECONOMICS](https://www.bartleby.com/isbn_cover_images/9781337794985/9781337794985_smallCoverImage.gif)
![Principles of Macroeconomics (MindTap Course List)](https://www.bartleby.com/isbn_cover_images/9781285165912/9781285165912_smallCoverImage.gif)
Principles of Macroeconomics (MindTap Course List)
Economics
ISBN:
9781285165912
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
![Brief Principles of Macroeconomics (MindTap Cours…](https://www.bartleby.com/isbn_cover_images/9781337091985/9781337091985_smallCoverImage.gif)
Brief Principles of Macroeconomics (MindTap Cours…
Economics
ISBN:
9781337091985
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
![Principles of Macroeconomics (MindTap Course List)](https://www.bartleby.com/isbn_cover_images/9781305971509/9781305971509_smallCoverImage.gif)
Principles of Macroeconomics (MindTap Course List)
Economics
ISBN:
9781305971509
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
![Essentials of Economics (MindTap Course List)](https://www.bartleby.com/isbn_cover_images/9781337091992/9781337091992_smallCoverImage.gif)
Essentials of Economics (MindTap Course List)
Economics
ISBN:
9781337091992
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning