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Calculate the equilibrium quantity of loanable funds

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Reference no: EM131079603

Suppose that the loanable funds market in an economy is initially described by the following equations where i is the interest rate and Q is the quantity of loanable funds measured in millions of dollars:

Demand for loanable funds: i = 8 - 0.8Q

Supply of loanable funds: i = 2 + 0.8Q

Furthermore assume that this economy's government is currently running a balanced budget.

a. Given the above information, calculate the equilibrium quantity of loanable funds and the equilibrium price in this market. Show your work.

Reference no: EM131079603

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