In response to a developing recession and fears of deflation, the government of a particular country, which is a small open economy, has increased its borrowing plans significantly. It is predicted that the debt to GDP ratio will increase from 40% to 70% over a given five-year period. (i) Discuss the impact that concerns about deflation may have on longterm bond yields, all other things being equal. (2) (ii) Explain the possible effects of increased saving, caused by the recession, on the level of government bond yields, all other things being equal. (3) (iii) (a) Discuss, with reasons, the likely impact on government bond yields of the policy of expanding borrowing, all other things being equal. (b) Explain what is meant by "crowding out" of economic activity by increased government borrowing and describe the various forms of crowding out that may arise as a result of this policy change. (7)