Table 23.3.5

-Refer to Table 23.3.5. The table shows an economy's demand for loanable funds schedule and supply of loanable funds schedule when the government's budget is balanced. If the government budget surplus is $2.0 trillion, the real interest rate is ________ percent a year, the quantity of investment is ________ trillion, and the quantity of private saving is ________ trillion.

Question

Table 23.3.5
 
-Refer to Table 23.3.5. The table shows an economy's demand for loanable funds schedule and supply of loanable funds schedule when the government's budget is balanced. If the government budget surplus is $2.0 trillion, the real interest rate is ________ percent a year, the quantity of investment is ________ trillion, and the quantity of private saving is ________ trillion.

Quizplus · Accepted Answer

A government budget surplus increases the supply of loanable funds. With a surplus of $2.0 trillion, the new supply of loanable funds will be $12.5 trillion ($10.5 trillion + $2.0 trillion). At an interest rate of 6%, the quantity of investment demanded is $7.5 trillion and the quantity of private saving supplied is $7.5 trillion. Therefore, the answer is E.

Table 23.3.5 -Refer to Table 23.3.5. the Table Shows an Economy's Demand