a budget surplus of $50 billion more next year than this year. c) How does the elasticity of supply of loanable funds affect the size of these changes? Hint: Use a diagram to illustrate! d) How does the elasticity of demand for loanable funds affect the size of these changes? Hint: Use a diagram to illustrate. e) Suppose households believe that smaller government borrowing today implies lower taxes to pay off the government debt in the future. What does this belief do to private saving and the supply of loanable funds today? Does it increase or decrease the affects you discussed in parts (a) and (b)?
a budget surplus of $50 billion more next year than this year. c) How does the elasticity of supply of loanable funds affect the size of these changes? Hint: Use a diagram to illustrate! d) How does the elasticity of demand for loanable funds affect the size of these changes? Hint: Use a diagram to illustrate. e) Suppose households believe that smaller government borrowing today implies lower taxes to pay off the government debt in the future. What does this belief do to private saving and the supply of loanable funds today? Does it increase or decrease the affects you discussed in parts (a) and (b)?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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