5. Impact of budget deficits The following graph shovs 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 automobile industry is on the verge of bankruptcy and the U.S. government decides to implement a several-billion-dollar bailout plan without a rise in taxes, causing 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.
5. Impact of budget deficits The following graph shovs 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 automobile industry is on the verge of bankruptcy and the U.S. government decides to implement a several-billion-dollar bailout plan without a rise in taxes, causing 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.
Essentials of Economics (MindTap Course List)
8th Edition
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter18: Savings,investment And The Financial System
Section: Chapter Questions
Problem 9PA
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