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8. Problems and Applications Q8 Suppose the government borrows $20 billion more next year than this year. The following graph shows the market for loanable funds before the additional borrowing for next year. Use the orange line (square point) to graph the new supply of loanable funds as a result of this government policy to borrow $20 billion more next year than this year. Interest Rate (Percent) 10 9 1 0 Demand Supply 0 10 20 30 40 50 60 70 80 90 100 Loanable Funds (Billions of dollars) Private saving increases by less than $20 billion. National saving decreases by less than $20 billion. Investment increases by less than $20 billion. Public saving decreases by exactly $20 billion. New Supply As a result of this policy, the equilibrium interest rate Which of the following statements accurately describe the effect of the increase in government borrowing? Check all that apply. A more elastic supply of loanable funds would result in national saving changing by A more elastic demand for loanable funds would result in national saving changing by This belief would cause people to save This would ? as a result of the increase in government borrowing. as a result of the increase in government borrowing Suppose households believe that greater government borrowing today implies higher taxes to pay off the government debt in the future. today, which would private saving and the effect of the reduction in public saving on the market for loanable funds. the supply of loanable funds

8. Problems and Applications Q8 Suppose the government borrows $20 billion more next year than this year. The following graph shows the market for loanable funds before the additional borrowing for next year. Use the orange line (square point) to graph the new supply of loanable funds as a result of this government policy to borrow $20 billion more next year than this year. Interest Rate (Percent) 10 9 1 0 Demand Supply 0 10 20 30 40 50 60 70 80 90 100 Loanable Funds (Billions of dollars) Private saving increases by less than $20 billion. National saving decreases by less than $20 billion. Investment increases by less than $20 billion. Public saving decreases by exactly $20 billion. New Supply As a result of this policy, the equilibrium interest rate Which of the following statements accurately describe the effect of the increase in government borrowing? Check all that apply. A more elastic supply of loanable funds would result in national saving changing by A more elastic demand for loanable funds would result in national saving changing by This belief would cause people to save This would ? as a result of the increase in government borrowing. as a result of the increase in government borrowing Suppose households believe that greater government borrowing today implies higher taxes to pay off the government debt in the future. today, which would private saving and the effect of the reduction in public saving on the market for loanable funds. the supply of loanable funds

Essentials of Economics (MindTap Course List)
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 8PA
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8. Problems and Applications Q8 Suppose the government borrows $20 billion more next year than this year. The following graph shows the market for loanable funds before the additional borrowing for next year. Use the orange line (square point) to graph the new supply of loanable funds as a result of this government policy to borrow $20 billion more next year than this year. Interest Rate (Percent) 10 9 8 7 3 2 1 0 0 Demand 10 20 30 40 50 60 70 Loanable Funds (Billions of dollars) 80 Supply 90 100 Private saving increases by less than $20 billion. National saving decreases by less than $20 billion. Investment increases by less than $20 billion. Public saving decreases by exactly $20 billion. O This belief would cause people to save This would New Supply As a result of this policy, the equilibrium interest rate Which of the following statements accurately describe the effect of the increase in government borrowing? Check all that apply. A more elastic supply of loanable funds would result in national saving changing by A more elastic demand for loanable funds would result in national saving changing by (?) as a result of the increase in government borrowing. as a result of the increase in government borrowing. Suppose households believe that greater government borrowing today implies higher taxes to pay off the government debt in the future. today, which would private saving and the effect of the reduction in public saving on the market for loanable funds. the supply of loanable funds.
Transcribed Image Text:8. Problems and Applications Q8 Suppose the government borrows $20 billion more next year than this year. The following graph shows the market for loanable funds before the additional borrowing for next year. Use the orange line (square point) to graph the new supply of loanable funds as a result of this government policy to borrow $20 billion more next year than this year. Interest Rate (Percent) 10 9 8 7 3 2 1 0 0 Demand 10 20 30 40 50 60 70 Loanable Funds (Billions of dollars) 80 Supply 90 100 Private saving increases by less than $20 billion. National saving decreases by less than $20 billion. Investment increases by less than $20 billion. Public saving decreases by exactly $20 billion. O This belief would cause people to save This would New Supply As a result of this policy, the equilibrium interest rate Which of the following statements accurately describe the effect of the increase in government borrowing? Check all that apply. A more elastic supply of loanable funds would result in national saving changing by A more elastic demand for loanable funds would result in national saving changing by (?) as a result of the increase in government borrowing. as a result of the increase in government borrowing. Suppose households believe that greater government borrowing today implies higher taxes to pay off the government debt in the future. today, which would private saving and the effect of the reduction in public saving on the market for loanable funds. the supply of loanable funds.
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