a. Consider the hypothetical loanable funds market. The government increases its spending (G) by $400 through deficit financing. What is the effect of this event on household consumption assuming that disposable income remains unchanged?
It will increase by $100.
It will increase by $200.
It will decrease by $100.
It will decrease by $200.
None of the above.
b. Now, same information like a, (The government increases its spending (G) by $400 through deficit financing), if the Treasury Secretary convinces the President to balance the budget. If the government balances the budget by reducing spending (G), what will happen to business investment?
It will increase by $300.
It will increase by $400.
It will decrease by $200.
It will decrease by $300.
None of the above.
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a. Consider the hypothetical loanable funds market. The
government increases its spending (G) by $400 through...
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