9.The average inflation of India in 2010 reached 12.1 percent. During the same period, government deficits became large, and interest rates increased.

a.Suppose the Indian government reduces its deficit and gets back to a balanced budget. If other things remain the same, how will the demand or supply of loanable funds in India change?

b.With economic growth forecast to slow, future incomes are expected to fall. If other things remain the same, how will the demand or supply of loanable funds in India change?

c.Distinguish between the crowding-out effect and the Ricardo-Barro effect. How are the two effects related?