-The Table Above Gives the Demand for Loanable Funds and
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question 102

Essay

$$\begin{array} { c c c } \begin{array} { c } \text { Real interest rate } \\\text { (percent per year) }\end{array} & \begin{array} { c } \text { Demand for loanable funds Supply of loanable funds } \\\text { (billions of 2005 dollars) } \\\text { (billions of 2005 dollars) }\end{array} \\\hline 12 & 8.0 & 13.0 \\10 & 9.5 & 12.0 \\8 & 11.0 & 11.0 \\6 & 12.5 & 10.0 \\4 & 14.0 & 9.0 \\2 & 15.5 & 8.0\end{array}$$
-The table above gives the demand for loanable funds and private supply of loanable funds schedules.
a. What is the equilibrium real interest rate and quantity of loanable funds?
b. Suppose that the government has a budget surplus of $2.5 billion.If there is no Ricardo-Barro effect, what is the equilibrium real interest rate and quantity of loanable funds?

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Definitions:

Assembly Department

A segment within a manufacturing facility where parts are put together to form a finished product.

Predetermined Overhead Rate

is an estimated rate used to allocate manufacturing overhead costs to individual products or job orders based on a specific activity base.

Finishing Department

The final stage in the manufacturing process where products are completed, packaged, and prepared for delivery.

Direct Labor-Hour

A measure of the work time spent by employees who are directly involved in the production process.