To determine the quantity of loanable funds demanded in this closed economy, we can use the data provided in the table.
In an economy, the quantity of loanable funds demanded is typically derived from the following relationship:
\[ \text{Loanable Funds Supplied} = \text{Private Savings} + \text{Public Savings} \]
First, let's find the total income (GDP) and then calculate savings.
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Calculate private savings:
Private savings can be calculated as:
\[ \text{Private Savings} = \text{GDP} - \text{Consumer Spending} - \text{Taxes} \]
Here, Taxes are represented by "Taxes Minus Transfers", which implies that this is the net effect of taxes after considering transfers (which for this scenario acts as a part of our calculations).
\[ \text{Taxes} = \text{Taxes Minus Transfers} = 1.0 \text{ trillion} \]
Thus,
\[ \text{Private Savings} = 8.7\text{ trillion} - 6.1\text{ trillion} - 1.0\text{ trillion} = 1.6\text{ trillion} \]
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Calculate public savings:
Public savings can be calculated as:
\[ \text{Public Savings} = \text{Taxes} - \text{Government Purchases} \]
\[ \text{Public Savings} = 1.0\text{ trillion} - 0.8\text{ trillion} = 0.2\text{ trillion} \]
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Calculate total savings:
Now, add private savings and public savings to find the total savings, which equals total loanable funds supplied (and in equilibrium, also demanded):
\[ \text{Total Savings} = \text{Private Savings} + \text{Public Savings} \]
\[ \text{Total Savings} = 1.6\text{ trillion} + 0.2\text{ trillion} = 1.8\text{ trillion} \]
Thus, the quantity of loanable funds demanded in the economy is:
b. $1.8 trillion.
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