Refer to the Table Below to Answer the Following Question

question 126

Multiple Choice

Refer to the table below to answer the following question.
Table 7.3.3
-1Table 7.3.3 shows the demand for loanable funds schedule and the private supply of loanable funds schedule when the government's budget is balanced.If the Ricardo- Barro effect occurs, and if the government budget deficit is $2.0 trillion, the real interest rate is _______ percent a year and the quantity of investment is _______ trillion.

• A)3.0; $7.5
• B)5.0; $7.0
• C)5.0; $5.0
• D)9.0; $7.0
• E)7.0; $6.0

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Definitions:

Industry

A sector of the economy characterized by the production of goods or provision of services within a certain field.

Interest Rate

The price paid for the use of borrowed funds, or the return earned on deposited funds.

New Capital

Funds or resources accumulated for the purpose of investment in new projects, expansion of operations, or renewal of facilities.

Investment

Investment involves allocating resources, usually financial, with the expectation of generating an income or profit, often through the purchase of assets designed to grow in value over time.