Question

In: Economics

The budget deficit is defined as Select one: a. T - ( G + TR), and...

The budget deficit is defined as

Select one:
a. T - ( G + TR), and this is negative.
b. T + ( G + TR), and this is negative.
c. T + ( G - TR), and this is negative.
d. T - ( G + TR), and this is positive.

An increase in public saving has what impact on the market for loanable funds?

Select one:
a. The supply of loanable funds increases.
b. The supply of loanable funds decreases.
c. The demand for loanable funds decreases.
d. The demand for loanable funds increases.

Equilibrium in the loanable funds market determines

Select one:
a. the nominal interest rate.
b. the real interest rate.
c. the expected interest rate.
d. the current interest rate.

Solutions

Expert Solution

Answer: Correct answer is A

Budget deficit defined as when government expenditure will increase the government revenue. When T -(G+TR) is  negative . The government is having the budget deficit.

Answer: correct answer is a

Increase I public saving will increase the supply of lonable funds

When rate of interest is high , people will save more money in banks in order to get maximum return .thus supply of lonable funds will also increase because lonable funds shows that quantity of saving will increase which is available as rate of interest will increase.

Answer: correct answer is B real rate of interest

Equilibrium in lonable funds market determines the real interest rate.

Amount of borrowing and amount of saving will be in equilibrium by adjusting the real rate of interest.

Borrowers will demand the lonable funds and savers will supply the lonable funds.


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