Assumed that the government maintained a balanced budget initially. However, the financialsecretary underestimated the recovery of local economy and the budget surplus is resulted. How does the budget surplus affect the loanable fund market? How does this market restore the equilibrium? How is the ‘private sector spending’ affected by the ‘public sector spending’? Explain and illustrate with a well-labelled diagram

icon
Related questions
Question

Assumed that the government maintained a balanced budget initially. However, the financialsecretary underestimated the recovery of local economy and the budget surplus is resulted. How does the budget surplus affect the loanable fund market? How does this market restore the equilibrium? How is the ‘private sector spending’ affected by the ‘public sector spending’? Explain and illustrate with a well-labelled diagram. 

Expert Solution
steps

Step by step

Solved in 2 steps with 1 images

Blurred answer