1. Suppose the government borrows $20 million more next year than this year. a. Draw and fully label a diagram to illustrate the market for loanable fund to analyze this policy. b. Does the rate of interest rise or fall? c. What happens to investment? To private savings? To public savings? To national savings? d. How does the elasticity of the supply of loanable funds affect the size of these changes? e. How does the elasticity of the demand of loanable funds affect the size of these changes?

1. Suppose the government borrows $20 million more next year than this year. a. Draw and fully label a diagram to illustrate the market for loanable fund to analyze this policy. b. Does the rate of interest rise or fall? c. What happens to investment? To private savings? To public savings? To national savings? d. How does the elasticity of the supply of loanable funds affect the size of these changes? e. How does the elasticity of the demand of loanable funds affect the size of these changes?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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