Business, 18.08.2021 02:30 glydelxc2780
Assume that the equilibrium in the loanable funds market is at an interest rate (i) of 3% and the total quantity of loans is $500 billion. In addition, in this initial situation, the government is borrowing $50 billion per year to fund the budget deficit.
a. What is the private investment in this initial equilibrium?
b. At R=3% what would be the quantity demanded of loanable funds?
c. In which direction does the interest rate change to bring the market back into equilibrium?
d. Assume that in the new equilibrium, $575 billion is borrowed. Assume complete crowding out. What is the total change in AD from this action?
Answers: 1
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Assume that the equilibrium in the loanable funds market is at an interest rate (i) of 3% and the to...
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