Table 1 shows the demand for loanable funds schedule and the supply of loanable funds schedule when the government budget is balanced 1 If the government budget surplus is $1 trillion, what are the real interest rate, the quantity of investment, and the quantity of private saving 2 If the governmen...

1 If the government budget surplus is 1 trillion the supply of loanable funds increases Figure 1 sho ...

Table 1 shows the demand for loanable funds schedule and the supply of loanable funds schedule when

Question:

Table 1 shows the demand for loanable funds schedule and the supply of loanable funds schedule when the government budget is balanced.

TABLE 1 Real interest rate (percent per year) 456N 6 7 8 9 10 Loanable Loanable funds demanded supplied funds

1. If the government budget surplus is $1 trillion, what are the real interest rate, the quantity of investment, and the quantity of private saving?

2. If the government budget deficit is $1 trillion, what are the real interest rate, the quantity of investment, and the quantity of private saving? Is there any crowding out in this situation?

3. If the government budget deficit is $1 trillion and the Ricardo-Barro effect occurs, what are the real interest rate and the quantity of investment?

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