Suppose government moves to increase its budget deficit by $30 million. With the aid of the market for loanable funds diagram, illustrate the impact of this government spending.
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Suppose government moves to increase its budget deficit by $30 million. With the aid of the market for loanable funds diagram, illustrate the impact of this government spending.
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- Collaboration with Congress during the Clinton administration allowed for an aggressive deficit‑cutting plan to pass. At the end of the 1990s, Congress eliminated the government deficit. Manipulate the graph to illustrate how the elimination of the deficit affects the loanable funds market. look at image for graph What does the model predict will happen to the quantity of private investment as a result of elimination of the government deficit? Private investment will increase because the cost of borrowing increases. decrease because the cost of borrowing increases. decrease because the cost of borrowing decreases. increase because the cost of borrowing decreases.The table shows an economy's demand for loanable funds and supply of loanable funds schedules when the government's budget is balanced. The quantity of loanable funds demanded increases by $2.0 trillion at each real interest rate and the quantity of loanable funds supplied increases by $1.0 trillion at each interest rate. If, at the same time the government budget becomes a deficit of $1.0 trillion, what are the real interest rate, the quantity of loanable funds, investment, and saving? >>> Answer to 1 decimal place. Real interest rate (percent per year) Loanable funds Loanable funds demanded supplied (trillions of 2012 dollars per year) 4 7.5 6.5 5 7.0 7.0 6 6.5 7.5 7 6.0 8.0 8 5.5 8.5 9 5.0 9.0 10 4.5 9.5 The real interest rate is 7 percent a year. The quantity of loanable funds is $ trillion, investment is $ trillion, and saving is $ trillion.Using a graph representing the market for loanable funds, show and explain what happens tointerest rates and investment if a government goes from a deficit to a surplus.
- The table sets out the data for an economy when the government's budget is balanced. Real Loanable funds Loanable funds interest rate If the government's budget becomes a deficit of $1.0 billion, what are the real demanded supplied (percent per year) interest rate and investment? (billions of 2007 dollars) 4 7.5 4.5 Does crowding out occur? 7.0 5.0 6.5 5.5 ..... If the government's budget becomes a deficit of $1.0 billion, the real interest rate is 7 6.0 6.0 percent a year and the quantity of investment is $ >>> Answer to 1 decimal place. billion. 8 5.5 6.5 9. 5.0 7.0 10 4.5 7.5Use the orange line (square point) to graph the new supply of loanable funds as a result of this government policy to borrow $20 billion more next year than this year. Interest Rate (Percent) 10 9 0 Demand 10 20 30 40 50 60 70 80 Loanable Funds (Billions of dollars) Supply As a result of this policy, the equilibrium interest rate rises 90 100 Public saving decreases by less than $20 billion. National saving decreases by less than $20 billion. Private saving increases by less than $20 billion. Investment decreases by more than $20 billion. The more elastic the demand for loanable funds, the Which of the following statements accurately describe the effect of the increase in government borrowing? Check all that apply. New Supply A more elastic supply of loanable funds would result in national saving changing by This belief would cause people to save This would ? as a result of the increase in government borrowing. the change in national saving as a result of the increase in government…The following graph shows the demand for loanable funds and the supply of loanable funds in the United States. At the current equilibrium, the government is experiencing a balanced budget. Assume that the U.S. government bails out several troubled banks without increasing taxes, creating a budget deficit. Show the effect of the budget deficit on the market for loanable funds by shifting the demand (D) curve, the supply (S) curve, or both. D S INTEREST RATE F2 -O- F3 Ö+ F4 C D F5 a F6 N F7 51- F8 5+ F9 Ⓒ F10 -0. F11 F12 Fn Lock Ins P
- Using a graph representing the market for loanable funds, show and explain what happens to interest rates and investment if a) a reduction in military spending moves the government's budget from deficit into surplus. b) the government raises its tax on corporate profits. Other tax changes also are made, such that the government's deficit remains unchanged. c) a rise in life span of Americans.Economists that favor balanced budgets warn against increases in government spending without a corresponding increase in taxes. Modify the graph to illustrate effect of this change to the public budget on the market for loanable funds, according to these economists. Real interest rate Demand Supply X Quantity of loanable funds Select all of the factors that will be reduced as a result of this change in the public budget. labor productivity domestic investment imports capital inflowsSuppose the government ran a budget surplus in 2018 and a larger surplus in 2019. The loanable funds model would predict that, as a result of the increase in the surplus, A. both the government debt and interest rates increased between 2018 and 2019. B. the government debt decreased and interest rates increased between 2018 and 2019. both the government debt and interest rates decreased between 2018 and 2019. C. D. the government debt increased and interest rates decreased between 2018 and 2019.
- In briefly Explain the government budget deficit and debt and how this can cause crowding out for loanable funds in the market.?Suppose the GDP is $8 trillion, taxes are $1.5 trillion, private saving is $0.5 trillion, and public saving is $0.2 trillion. assuming this economy is closed, calculate consumption, government purchases national saving, and investment. b. imagine that government start with a balanced budget and then, because of an increase in taxes, start running a budget surplus. graphically analyze the effects of the budget surplus on interest rate, saving and investment if loanable funds means the flow of resources available from private savingAccording to how we model the Loanable Funds market in Ch. 6 (considering household savings and taking (T – G) as government’s net ‘saving,’ which could be negative it there were a budget deficit), which of the following shifts the Supply of Loanable Funds curve to the left? (T = taxes; G = government spending.) Group of answer choices A) higher tax rates on business investment spending B) a change in tastes toward consuming less C) higher budget deficit D) change in tastes toward saving more E) lower budget deficit