Homework Answers
(1) (C)
Real interest rate = Nominal rate - Inflation rate = 10% - 4% = 6%, which is equilibrium real rate at intersection of demand and supply curves.
(2) (A)
Private saving ($ trillion) = GDP - Consumption = 12 - 8 = 4
(4) (C)
Investment ($ trillion) = GDP - Consumption - Government spending - Exports + Imports = 12 - 8 - 2 - 1 + 3 = 4
(5) (B)
Current account balance ($ trillion) = Export - Import = 1 - 3 = - 2 (deficit of $2 trillion)
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