The table given below shows an economy's demand for loanable funds and supply of loanable funds schedules when the government's budget is balanced. Real Interest rate (% per year) Loanable fund demanded Loanable fund supplied (Trillian of 2002 $) (Trillian of 2002 $) 4 8.5 5.5 8.0 6.0 6 7.5 6.5 7 7.0 7.0 8 6.5 7.0 9 6.0 8.0 10 5.5 8.5 a. If the government has a budget surplus of $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? b. If the government has a budget deficit of $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? c. If the government has a budget deficit of $1 trillion and the Ricardo-Barro effect occurs, what are the real interest rate and the quantity of investment?

Q: (10 pts) Describe how the following statements affect either the supply or the demand for loanable…

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A: The given figure indicates the market for loanable funds.

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Q: Disposable Income ($) Consumption ($) 1,000 800 1,100 880 1,200 960 1,300 1,040 1,400 1,120

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A: The following curves are drawn below:

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