"How might large federal deficits affect future economic growth?"

The table sets out the data for an economy when the government's budget is balanced. The quantity of loanable funds demanded increases by $1.5 billion at each real interest rate and the quantity of loanable funds supplied increases by $0.5 billion at each interest rate If, at the same time the government budget becomes a deficit of $1.0 billion, what are the real interest rate and investment? Does any crowding out occur? >>> Answer to 1 decimal place The real interest rate is Investment is $ billion. There OA. is, HI percent a year crowding out in this situation because OB. is no the deficit increases the real interest rate, which decreases investment investment is $7.0 billion Real interest rate (percent per year) 4 5 6 7 8 9 10 Loanable funds Loanable funds demanded supplied (billions of 2007 dollars) 8.0 7.5 7.0 6.5 6.0 5.5 5.0 5.0 5.5 6.0 6.5 7.0 7.5 8.0

How might an increase in government spending affect the national debt and economic growth in the short term? A. Increase national debt and slow economic growth B. Decrease national debt and stimulate economic growth C. Increase national debt and stimulate economic growth D. Decrease national debt and slow economic growth

Describe how the federal deficit is a burden on the shoulders of future generations.