The Above Table Has the Private Demand for Loanable Funds

question 5

Multiple Choice

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

The above table has the private demand for loanable funds and the private supply of loanable funds schedules.
- If the government budget deficit 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)4 percent; $500 billion
• B)6 percent; $600 billion
• C)8 percent; $700 billion
• D)8 percent, $500 billion
• E)4 percent; $700 billion

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