Suppose government provides tax rebate to small business on their business-related expenditure. Assuming no change in government budgetary position, this policy is likely to have a positive effect on household (or private) saving in the economy (Hint: think about the effect of this policy in Loanable Funds Market) Is this statement true, false or uncertain? Please provide your explaination.

Suppose government provides tax rebate to small business on their business-related expenditure. Assuming no change in government budgetary position, this policy is likely to have a positive effect on household (or private) saving in the economy (Hint: think about the effect of this policy in Loanable Funds Market) Is this statement true, false or uncertain? Please provide your explaination.

Economics For Today

10th Edition

ISBN:9781337613040

Author:Tucker

Publisher:Tucker

Chapter18: The Keynesian Model

Section: Chapter Questions

Problem 6SQP

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As a result of this policy, the equilibrium interest rate . Which of the following statements accurately describe the effect of the increase in government borrowing? Check all that apply. National saving decreases by less than $20 billion. Private saving increases by less than $20 billion. Public saving decreases by exactly $20 billion. Investment increases by less than $20 billion. The more elastic the supply of loanable funds, the is the change in national saving as a result of the increase in government borrowing. The more elastic the demand for loanable funds, the the change in national saving as a result of the increase in government borrowing. Suppose households believe that greater government borrowing today implies higher taxes to pay off the government debt in the future. This belief would cause people to save today, which would private saving and the supply of loanable funds. This would the…
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