The Table Gives Data on Interest Rates and Investment Demand

question 67

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. Assume that the public debt is used to expand the capital stock of the economy and that, as a consequence, the investment-demand schedule changes from Id₁ to Id₂. At the same time, the interest rate rises from 3% to 4% as the government borrows money to finance the public debt. How much crowding out of private investment will occur in this case?

• A) $0
• B) $100 billion
• C) $600 billion
• D) $700 billion

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Definitions:

Fetus

The developmental stage of a human between the embryonic phase and birth.

Embryonic Period

A stage in prenatal development occurring from the 2nd to the 8th week after fertilization during which major organs and structures begin to develop.

Developing Fetus

Describes the growth and development stages of an unborn baby inside the mother's womb.

Age of Viability

The point in fetal development at which the fetus may survive outside the uterus with medical support, typically around 24 weeks of pregnancy.