The Table Gives Data on Interest Rates and Investment Demand

question 62

Multiple Choice

The table gives data on interest rates and investment demand (in billions of dollars) in a hypothetical economy. Refer to the above table. Using the I_d1 schedule, assume that the government needs to finance the public debt and this public borrowing increases the interest rate from 3% to 4%. How much crowding out of private investment will occur?

• A) $100 billion
• B) $200 billion
• C) $600 billion
• D) $700 billion

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