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Consider the following policy scenarios and for each scenario diagrammatic and fully explain using analysis for the market for loanable funds how the following government
Consider the following policy scenarios and for each scenario diagrammatic and fully explain using analysis for the market for loanable funds how the following government policies affect the economy's saving and investment. [Kindly note: Each Diagram (5 marks), Detailed Explanation (15 marks). (a) Scenario Policy 1: Suppose the government starts with a balanced budget and then, because of a tax cut or spending increase, starts running a budget deficit. [20 marks] (b) Scenario Policy 2: Suppose the government changes the tax code, allowing individuals to reduce their taxable income if they save money in registered retirement savings plans (RRSPs). [20 marks]
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