Use the table below to answer the following questions.
Table 7.2.1
The table shows an economy's demand for loanable funds schedule and supply of loanable funds schedule.

-Consider Table 7.2.1.If planned investment increases by $1.0 trillion at each real interest rate, what is the new equilibrium real interest rate?
A)5 percent a year
B)7 percent a year
C)6.5 percent a year
D)6.0 percent a year
E)There is no new equilibrium real interest rate.

Question

Use the table below to answer the following questions.
Table 7.2.1
The table shows an economy's demand for loanable funds schedule and supply of loanable funds schedule.
 
-Consider Table 7.2.1.If planned investment increases by $1.0 trillion at each real interest rate, what is the new equilibrium real interest rate?
A)5 percent a year 
B)7 percent a year 
C)6.5 percent a year 
D)6.0 percent a year 
E)There is no new equilibrium real interest rate.

Quizplus · Accepted Answer

An increase in planned investment shifts the investment demand curve to the right. This results in a higher equilibrium real interest rate to balance the increased demand for investment with the available supply of savings. Without specific details from Table 7.2.1, the general principle is that an increase in investment demand leads to a higher interest rate, assuming the supply of savings does not change immediately.

Use the Table Below to Answer the Following Questions