Suppose the Following Equations Give the Demand and Supply for Loanable

question 72

Essay

Suppose the following equations give the demand and supply for loanable funds in billions of dollars; r is the real interest rate in percentage points :
QD = 160 - 10r
QS = -20 + 20r
a) Calculate the equilibrium savings, investment, and interest rate.
b) How much is the total amount received by lenders in interest?
c) Calculate the gains to lenders from financial transactions (producer surplus).
d) Calculate the gains to borrowers (the equivalent of consumer surplus).

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