Suppose the following equations give the demand and supply for loanable funds in billions of dollars; r is the real interest rate in percentage points :
QD = 160-10r
QS = -20 + 20r
a) How do the demand and supply equations change if the government deficit increased by $5 billion?
b) Calculate the new equilibrium interest rate and quantity of loanable funds. (Compare this to the zero-deficit equilibrium.)
c) Calculate the changes in consumer and producer surplus due to the increase in government deficit. Who gains and who loses from the change in government deficit?

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The Answer of Suppose the following equations give the demand and supply for loanable funds in billions of dollars; r is the real interest rate in percentage points :
QD = 160-10r
QS = -20 + 20r
a) How do the demand and supply equations change if the government deficit increased by $5 billion?
b) Calculate the new equilibrium interest rate and quantity of loanable funds. (Compare this to the zero-deficit equilibrium.)
c) Calculate the changes in consumer and producer surplus due to the increase in government deficit. Who gains and who loses from the change in government deficit?

Suppose the Following Equations Give the Demand and Supply for Loanable