The Above Table Has the Private Demand for Loanable Funds

question 51

Multiple Choice

$\begin{array} { c c c } \hline &\text { Demand for loanable funds }&\text { Supply of loanable funds }\\\text { Real interest rate } & \text { (billions of } & \text { (billions of } \\\text { (percent per year) } & \text { 2005 dollars) } & 2005 \text { dollars) } \\\hline 3 & 750 & 450 \\4 & 700 & 500 \\5 & 650 & 550 \\6 & 600 & 600 \\7 & 550 & 650 \\8 & 500 & 700 \\9 & 450 & 750 \\\hline\end{array}$


The above table has the private demand for loanable funds and the private supply of loanablefunds schedules.
- If the government budget surplus is $200 billion, and there is a Ricardo-Barro effect, the equilibrium real interest rate is_{--------------------} and the equilibrium quantity of loanable funds is _{--------------------}.

• A)6 percent; $600 billion
• B)4 percent; $500 billion
• C)8 percent; $700 billion
• D)8 percent, $500 billion
• E)4 percent; $700 billion

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Definitions:

Half Year Rule

A tax regulation in some jurisdictions that allows for only half of the applicable depreciation expense to be claimed in the year that an asset is purchased.

UCC

Refers to the Uniform Commercial Code, a set of laws that govern commercial transactions in the United States.