Thank you for visiting Suppose the market for loanable funds is in equilibrium Given the numbers below find the demand for loanable funds investment GDP 8 7 trillion Consumption. This page is designed to guide you through key points and clear explanations related to the topic at hand. We aim to make your learning experience smooth, insightful, and informative. Dive in and discover the answers you're looking for!
Answer :
Final answer:
The demand for loanable funds (investment) is -$0.5 trillion.
Explanation:
To find the demand for loanable funds (investment), we need to calculate the difference between the total investment and the savings in the economy. The equation for the demand for loanable funds is:
Demand for Loanable Funds = Investment - Savings
Given the numbers provided:
- GDP = $8.7 trillion
- Consumption Spending = $3.5 trillion
- Taxes Net of Transfers = $2.7 trillion
- Government Purchases = $3.0 trillion
To calculate savings, we need to subtract consumption spending, taxes net of transfers, and government purchases from GDP:
Savings = GDP - Consumption Spending - Taxes Net of Transfers - Government Purchases
Substituting the given values:
Savings = $8.7 trillion - $3.5 trillion - $2.7 trillion - $3.0 trillion
Savings = $8.7 trillion - $9.2 trillion
Savings = -$0.5 trillion
Now, we can calculate the demand for loanable funds:
Demand for Loanable Funds = Investment - Savings
Substituting the given values:
Demand for Loanable Funds = Investment - (-$0.5 trillion)
Demand for Loanable Funds = Investment + $0.5 trillion
Since the market for loanable funds is in equilibrium, the demand for loanable funds must be equal to the supply of loanable funds. Therefore, the demand for loanable funds (investment) is equal to -$0.5 trillion.
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