Macro assignment 2

Macro assignment 2 - Karina Santana March 21, 2011...

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Karina Santana March 21, 2011 Macroeconomics Hw: Chapter 10 problem 7 Tuesday and Thursday 9:05-10:45 a.m. In this problem, we are told that because the government is running a budget balance of zero it decided to increase the education spending by $200 billion. They finance this spending by selling bonds. The diagram below demonstrates the market for loan able funds before the government sells the bonds. As we can see the demand rate is decreasing while the supply rate increases. Using the chart which was given I created a table. The table that belongs to this graph is as followed; Market for Loan able funds before the government sells the bonds Price Demand (Interest Rate) Supply (Interest Rate) $200  16 4 $400  12 8 $500  10 10 $600  8 12 $800  4 16 $1,000  0 20 The demand curve for loan able funds slopes downward: the lower the interest rate, the greater the quantity of loan able funds demanded. Here, reducing the interest rate from 16% to 0% increases the quantity of loan able funds demanded from $200 billion to
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This note was uploaded on 10/12/2011 for the course ECON 2100 taught by Professor Sardy during the Spring '11 term at CUNY Brooklyn.

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Macro assignment 2 - Karina Santana March 21, 2011...

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