2. Answer the 3 following independent questions on separate graphs as illustrated in class and on the homework.

Label completely and legibly for credit.

a. Using the bond supply/bond demand model, graphically illustrate and indicate the impact on i and q if

Households increase their marginal propensity to save (savings rate) at the same time the federal government

announces a significant deficit reduction program by cutting spending on non-entitlement government programs.

b. Using the bond supply/bond demand model, graphically illustrate and explain the impact on i and q if the federal

government gives a significant cut to the personal income tax rate while maintaining the same level of spending.

c. Suppose a Democratic candidate is elected as the next President and strongly believes in the Green New Deal.

To support this program they resort to "printing" money. Using the loanable model, graphically illustrate and

explain the impact on i and q if the public believes the Federal Reserve's (hypothetical) estimate that this policy will

increase expected inflation rates from 2% in the U.S. to 16%.