Question
In: Economics
1. The French Government runs a budget deficit and finances it by borrowing $20 billion. Use...
1. The French Government runs a budget deficit and finances it by borrowing $20 billion. Use the loanable fund model to show the decline in public savings and decline in investments (crowding out).
Answer:
Solutions
Rahul Sunny answered 2 years agoRelated Solutions
When the government runs a budget deficit,
When the government runs a budget deficit,a. national saving is higher than it would be if the budget were
balanced.b. investment is lower than it would be if the budget were
balanced.c. interest rates are lower than they would be if the budget were
balanced.d. All of the above are correct.e. None of the above is correct.
1. What is the link between the budget deficit and the trade deficit? Government borrowing from...
1. What is the link between the budget deficit and the trade
deficit?
Government borrowing from the budget deficit leads to higher
real interest rates which cause foreigners to invest in the U.S.
which increase the international value of the dollar causing
imports to rise and exports to fall....i.e. trade deficit.
Government borrowing from the budget deficit leads to higher
real interest rates which cause foreigners to pull their money out
of the U.S. due to its cost which decrease...
When the Government runs a budget deficit, it must sell Treasury bonds to finance that deficit....
When the Government runs a budget deficit, it must sell Treasury
bonds to finance that
deficit. To analyze the impact of increased government spending,
assume the Treasury will
be selling new 1-year Treasury bills. Use a supply and demand
for bonds model to
determine what is likely to happen to interest rates on 1-year
bills. (Explain your graph)
Suppose, the government of Australia incurs a budget deficit of $50 billion due to increased government...
Suppose, the government of Australia incurs a budget deficit of
$50 billion due to increased government spending in 2020 as result
of Covid 19. Because of this, the government borrowing in 2021
increases by the same amount.
a) Show this development using a graph representing the market
for loanable funds for Australia . Explain in writing the effect of
this on interest rates.
b) Compare the size of equilibrium changes in 1) investment, 2)
public saving, 3) private saving and...
Suppose, the government of Australia incurs a budget deficit of $50 billion due to increased government...
Suppose, the government of Australia incurs a budget deficit of
$50 billion due to increased government spending in 2020 as result
of Covid 19. Because of this, the government borrowing in 2021
increases by the same amount.
a) Show this development using a graph representing the market
for loanable funds for Australia . Explain in writing the effect of
this on interest rates. .
Answer Graph
Effect on interest rate (1 mark)
b) Compare the size of equilibrium changes in...
Suppose, the government of Australia incurs a budget deficit of $50 billion due to increased government...
Suppose, the government of Australia incurs a budget deficit of
$50 billion due to increased government spending in 2020 as result
of Covid 19. Because of this, the government borrowing in 2021
increases by the same amount.
Show this development using a graph representing the market for
loanable funds for Australia[1]. Explain in writing the effect of
this on interest rates. .
Graph
Effect on interest rate (1
mark)
Compare the size of equilibrium changes in 1) investment, 2)
public...
If the U.S. government runs a budget deficit that will reduce interest rates? True False
If the U.S. government runs a budget deficit that will reduce
interest rates?
True
False
14. When the federal government runs a budget surplus rather than a deficit, how will the...
14. When the federal government runs a budget surplus rather
than a deficit, how will the public’s bond holdings and the supply
of money be affected?
To reduce the budget deficit, the government creates new unit taxes that generate $3 billion in...
To reduce the budget deficit, the government creates new unit
taxes that generate $3 billion in revenue. How will this affect
total surplus (i.e., consumer surplus + producer surplus)? a. Total
surplus will be unaffected b. Total surplus will fall by less than
$3 billion c. Total surplus will fall by $3 billion d. Total
surplus will fall by more than $3 billion
Effects of a government budget deficit
3. Effects of a government budget deficitConsider a hypothetical open economy. The following table presents data on the relationship between various real interest rates and national saving, domestic investment, and net capital outflow in this economy, where the currency is the U.S. dollar. Assume that the economy is currently experiencing a balanced government budget.Screen Shot 2020-10-09 at 3.24.05 PM.pngGiven the information in the preceding table, use the blue points (circle symbol) to plot the demand for loanable funds. Next, use...
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