The table gives data on interest rates and investment demand (in billions of dollars) in a hypothetical economy.
Refer to the above table. Assume that the public debt is used to expand the capital stock of the economy and that, as a consequence, the investment-demand schedule changes from Id1 to Id2. At the same time, the interest rate rises from 3% to 4% as the government borrows money to finance the public debt. How much crowding out of private investment will occur in this case?
A. $0
B. $100 billion
C. $600 billion
D. $700 billion
A. $0
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A private cost is a cost of production that is borne by the
A) consumer of the good. B) producer of the good. C) government. D) consumer of the good and the government.