Question

The table shows an​ economy's demand for loanable funds schedule and supply of loanable funds schedule.

What is the real interest​ rate, the quantity of​ investment, and the quantity of private​saving?

The real interest rate is ___

percent a​ year, the quantity of investment is ___

​trillion, and the quantity of private saving is ____

trillion.

Real interest rate ​(percent per​ year)	Loanable funds demanded	Loanable funds supplied
	​(trillions of 2009 dollars per​ year)
4	7.5	5.5
5	7.0	6.0
6	6.5	6.5
7	6.0	7.0
8	5.5	7.5
9	5.0	8.0
10	4.5	8.5

Answer 1

At the equilibrium real interest rate, the number of loanable funds demanded and the quantity of loanable funds supplied is the same. When the real interest rate is 6%, the quantity of loanable funds demanded and supplied are both equal to $6.5 trillion.

Therefore, the real interest rate is 6% a year

The demand for loanable funds = $6.5 trillion. So, the quantity of investment is $6.5 trillion

The supply of loanable funds = $6.5 trillion. So, the quantity of private saving is $6.5 trillion