What does the model predict will happen to the quantity of private investment as a result of elimination of the government deficit? Private investment will increase because the cost of borrowing increases. decrease because the cost of borrowing increases. decrease because the cost of borrowing decreases. increase because the cost of borrowing decreases.

ENGR.ECONOMIC ANALYSIS
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Chapter1: Making Economics Decisions
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Collaboration with Congress during the Clinton administration allowed for an aggressive deficit‑cutting plan to pass. At the end of the 1990s, Congress eliminated the government deficit. Manipulate the graph to illustrate how the elimination of the deficit affects the loanable funds market.

look at image for graph 

What does the model predict will happen to the quantity of private investment as a result of elimination of the government deficit? Private investment will

increase because the cost of borrowing increases.
decrease because the cost of borrowing increases.
decrease because the cost of borrowing decreases.
increase because the cost of borrowing decreases.

 

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