Question
1. Suppose the government increases spending on infrastructure but does not increase taxes to pay for it. a. What would be the major effect in
1. Suppose the government increases spending on infrastructure but does not increase taxes to pay for it.
a. What would be the major effect in the market for loanable funds
Increase in demand for loanable funds (increased supply of bonds)
Decrease in demand for loanable funds (decreased supply of bonds)
Increase in supply of loanable funds (increased demand for bonds)
Decrease in supply of federal funds (decreased demand for bonds)
Why?
b. Graphically illustrate the effect on the equilibrium interest rate and quantity of loanable funds.
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Fundamentals Of Futures And Options Markets
Authors: John C. Hull
4th Edition
0130176028, 9780130176028
