Suppose the government borrows 20 billion more next

year than #9923

Suppose the government borrows 20 billion more next year than

Suppose the government borrows $20 billion more next year than this year.

The following graph shows the market for loan able funds before the additional borrowing for
next year.

Use the orange fine (square point) to graph the new supply of loan able funds as a result of this
government policy to borrow more next year

As a result of this policy, the equilibrium interest rate rises.

Indicate whether each of the following economy components rises or falls as a result of this
policy change. Then determine if the magnitude of this change is less than, more than, or equal
to the 520 billion of extra government borrowing.

A more elastic: supply of loan able funds would result in the interest rate rising by loss and,
thus, national saving by.

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 A more elastic demand for loan able funds would result in the Interest rate rising by and thus
national saving failing by. Suppose households believe that greater government borrowing
today implies higher taxes to pay off the government debt in the future. This belief causes
people to save less today, which increases private saving and decreases the supply of loan
able of loanable funds. This will magnify the effect of the reduction in public saving on the
market for loanable funds.

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. As a result of this policy,
the equilibrium interest rate rises . Indicate whether each of the following economy components
rises or falls as a result of this policy change. Then determine if the magnitude of this change is
less than, more than, or equal to the $20 billion of extra government borrowing. A more elastic
supply of loanable funds would result in the interest rate rising by less and, thus, national saving
falling by. A more elastic demand for loanable funds would result in the interest rate rising by
and, thus, national saving falling by. Suppose households believe that greater government
borrowing today implies higher taxes to pay off the government debt in the future. This belief
causes people to save less today, which Increases private saving and decreases the supply of
loanable funds. This will magnify the effect of the reduction in public saving on the market for
loanable funds.

Suppose the government borrows 20 billion more next year than

ANSWER
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