Question 3 For parts a)-d), evaluate the effect of each of the following events on the market for loanable funds. Explain the effects on savings, investment, and the (neutral) real interest rate. a) The government runs a government budget surplus instead of a deficit. b) The government decides to forgive some of the $66 billion in student loan debt. c) Chinese investors stop sending their funds to Australia, reducing net capital inflows.
Question 3 For parts a)-d), evaluate the effect of each of the following events on the market for loanable funds. Explain the effects on savings, investment, and the (neutral) real interest rate. a) The government runs a government budget surplus instead of a deficit. b) The government decides to forgive some of the $66 billion in student loan debt. c) Chinese investors stop sending their funds to Australia, reducing net capital inflows.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
![Below is a table with US labour market data (in thousands):
1998
Working-age population 205, 220
Population
276, 154
Unemployed
Employed
6, 204
131,464
2008
2018
233,788
257, 791
304,543
327, 436
8,948
6,306
145, 363 155, 761](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fb1d8a568-9d1a-4bf6-9f02-1be0fe09bc3d%2F3d49ee51-6287-4ef0-af71-cb1e05a93c5c%2Fovocxwo_processed.png&w=3840&q=75)
Transcribed Image Text:Below is a table with US labour market data (in thousands):
1998
Working-age population 205, 220
Population
276, 154
Unemployed
Employed
6, 204
131,464
2008
2018
233,788
257, 791
304,543
327, 436
8,948
6,306
145, 363 155, 761
![Question 3
For parts a)-d), evaluate the effect of each of the following events on the market for
loanable funds. Explain the effects on savings, investment, and the (neutral) real
interest rate.
a) The government runs a government budget surplus instead of a deficit.
b) The government decides to forgive some of the $66 billion in student loan debt.
c) Chinese investors stop sending their funds to Australia, reducing net capital
inflows.
d) The nominal interest rate rises 1% in response to a 1% rise in the inflation rate.
Briefly compare the impact of the global financial crisis (GFC) in the US in 2007-
2009 to other U.S. recessions since 1950. Why did household consumption in the
US fall during this recession, unlike in previous recessions?
ŵ](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fb1d8a568-9d1a-4bf6-9f02-1be0fe09bc3d%2F3d49ee51-6287-4ef0-af71-cb1e05a93c5c%2Fn7brfam_processed.png&w=3840&q=75)
Transcribed Image Text:Question 3
For parts a)-d), evaluate the effect of each of the following events on the market for
loanable funds. Explain the effects on savings, investment, and the (neutral) real
interest rate.
a) The government runs a government budget surplus instead of a deficit.
b) The government decides to forgive some of the $66 billion in student loan debt.
c) Chinese investors stop sending their funds to Australia, reducing net capital
inflows.
d) The nominal interest rate rises 1% in response to a 1% rise in the inflation rate.
Briefly compare the impact of the global financial crisis (GFC) in the US in 2007-
2009 to other U.S. recessions since 1950. Why did household consumption in the
US fall during this recession, unlike in previous recessions?
ŵ
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