Question: The table sets out the data for an economy when the governments budget is balanced. a. Calculate the equilibrium real interest rate, investment, and private

The table sets out the data for an economy when the government’s budget is balanced. Real interest rate (percent per year) 2 3 4 5 6 7

a. Calculate the equilibrium real interest rate, investment, and private saving.
b. If planned saving decreases by $1 billion at each real interest rate, explain the change in the real interest rate and investment.
c. If planned investment decreases by $1 billion at each real interest rate, explain the change in saving and the real interest rate.

Real interest rate (percent per year) 2 3 4 5 6 7 8 Loanable funds demanded (billions of 2007 dollars) 8.0 7.0 6.0 Loanable funds supplied 5.0 4.0 3.0 2.0 4.0 5.0 6.0 7.0 8.0 9.0 10.0

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