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In briefly Explain the government budget deficit and debt and how this can cause crowding out for loanable funds in the market.?
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- Explain why is it difficult to set aside funds for investment when you are in poverty.In the late 1990s, the U.S. government moved from a budget deficit to a budget surplus and the trade deficit in the U.S. economy grew substantially. Using the national saving and investment identity, what can you say about the direction in which saving on/or investment must have changed in this economy?The following graph shows the demand for loanable funds and the supply of loanable funds in the United States. At the current equilibrium, the government is experiencing a balanced budget. Assume that the automobile industry is on the verge of bankruptcy and the U.S. government decides to implement a several-billion-dollar bailout plan without a rise in taxes, causing a budget deficit. 1. Show the effect of the budget deficit on the market for loanable funds by shifting the demand (D) curve, the supply (S) curve, or both. (Please use the image attached) 2. Based on this model, the budget deficit leads to an increase? a decrease? in the level of investment and an increase? a decrease? in the interest rate.
- The following graph shows the loanable funds market in the United States. It plots both the demand (D) for loanable funds and the supply (S) of loanable funds. At the current equilibrium, the government is operating with a balanced budget. Assume now that the financial industry is close to bankruptcy and the U.S. government decides to implement a bailout plan of several billion dollars without increasing taxes, causing a budget deficit. Show the effect of the budget deficit on the market for loanable funds by shifting the demand (D) curve, the supply (S) curve, or both. Based on this model, the budget deficit leads to (an increase/a decrease) in the level of investment and (an increase/a decrease) in the interest rate. Which of the following arguments might a supporter of a balanced budget make in defense of their position? Check all that apply. -An individual's share of the government debt represents only a small portion of his or her lifetime earnings. -A…The following graph shows the market for loanable funds. For each of the given scenarios, adjust the appropriate curve on the graph to help you complete the questions that follow. NOTE: the first dropdown question options are (fall or rise), the seconds are (decrease or increase), the thirds are (fall or rise), the fourths are (fall or rise), the fifths are (deficit or surplus), the sixths are (decreases or increases), the sevenths are (fall or rise), and the last ones is (crowding out ot increasing)Using a graph representing the market for loanable funds, show and explain what happens to interest rates and investment if: a reduction in military spending moves the government’s budget from deficit into surplus.
- 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.Draw a graph of the supply and demand of loanable funds. Then, show how the interest rate will be affected when the following scenarios occur: a. The government implements a program that reduces investment tax credits. b. The government budget deficit is reduced by 30%. (Hint: Does the government still need to borrow?) c. More foreigners are saving their money in U.S. banks.In the era of Pandemic, Indonesia’s government is trying to ensure that all of it’s people could live and survive through pandemic. Some of the government’s policies are affecting the market for loanable funds. Using curve, illustrate the change in the market for loanable funds if the government decided to: a) Borrow $20 billion from The World Bank b) Suppose households believe that the greater government borrowing today implies higher taxes to pay off the government debt in the future c) Pass laws that make it easier for UMKM to borrow money
- Use the loanable funds market to illustrate the effect of the following events on the equilibrium. Illustrate the effects on the interest rate and quantity of investment-savings a) The proportion of retired people in the population goes up. Think that usually retired people generally save less than working people at any interest rate. b) At any given interest rate, consumers decide to save more (assume the budget balance is zero). c) At any given interest rate, businesses become very optimistic about the future profitability of investment spending (assume the budget balance is zero).Use the analysis for the market for loanable funds diagram to illustrate and explain how the following government policy affects the economy’s saving and investment. Policy 1: Suppose the government starts with a balanced budget and then, because of a tax cut or spending increase, starts running a budget deficit.State, explain and draw the loanable funds diagram for i,ii and iii. (i) which which loanable funds curve would this policy affect?(ii) which way would the loanable funds curve shift?(iii) what would be the the impact on interest rates?According to how we model the Loanable Funds market in Ch. 6 (considering household savings and taking (T – G) as government’s net ‘saving,’ which could be negative it there were a budget deficit), which of the following shifts the Supply of Loanable Funds curve to the left? (T = taxes; G = government spending.) Group of answer choices A) higher tax rates on business investment spending B) a change in tastes toward consuming less C) higher budget deficit D) change in tastes toward saving more E) lower budget deficit
