Suppose the government borrows $50 billion more next year than this year, a, Use a supply-and-demand diagram to analyze this policy, Does the interest rate rise or fall? b. What happens to investment? To private saving? To public saving? To national saving? Compare the size of the changes to the $50 billion of extra government borrowing. C, see the attached picture.

Suppose the government borrows $50 billion more next year than this year, a, Use a supply-and-demand diagram to analyze this policy, Does the interest rate rise or fall? b. What happens to investment? To private saving? To public saving? To national saving? Compare the size of the changes to the $50 billion of extra government borrowing. C, see the attached picture.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Concept explainers

Public Saving

Public saving deals with the amount which has been in excess after meeting all the obligatory expenses and investment of the government. Taxes are collected by the government to meet its day-to-day expenditures. The obligatory expenses include all those expenses which are mandatory for the government. It cannot be avoided as it is inevitable.

Question

c. Suppose households believe that greater government borrowing today implies higher taxes
to
рay
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 effects you discussed in
parts (a) and (b)?

Suppose the government borrows $50 billion more next year
than this year.
a. Use a supply-and-demand diagram to analyze this policy.
Does the interest rate rise or fall?
b. What happens to investment? To private saving? To public
saving? To national saving? Compare the size of the
changes to the $50 billion of extra government borrowing,
C, see the attached picture.

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