Use the analysis for the market for loanable funds diagram to illustrate and explain how the following government policy affect the economy’s saving and investment. Policy 1: Suppose the government starts with a balanced budget and then, because of a tax cut or spending increase, starts running a budget deficit. For your answer state and explain (i) which which loanable funds curve would this policy affect? (ii) which way would the loanable funds curve shift? (iii) what would be the the impact on interest rates?
Use the analysis for the market for loanable funds diagram to illustrate and explain how the following government policy affect the economy’s saving and investment. Policy 1: Suppose the government starts with a balanced budget and then, because of a tax cut or spending increase, starts running a budget deficit. For your answer state and explain (i) which which loanable funds curve would this policy affect? (ii) which way would the loanable funds curve shift? (iii) what would be the the impact on interest rates?
Brief Principles of Macroeconomics (MindTap Course List)
8th Edition
ISBN:9781337091985
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter8: Savings,investment And The Financial System
Section: Chapter Questions
Problem 8PA
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1. Use the analysis for the market for loanable funds diagram to illustrate and explain how the following
government policy affect the economy’s saving and investment. Policy 1: Suppose the government starts
with a balanced budget and then, because of a tax cut or spending increase, starts running a budget
deficit.
For your answer state and explain
(i) which which loanable funds curve would this policy affect?
(ii) which way would the loanable funds curve shift?
(iii) what would be the the impact on interest rates?
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