May i please get help with this question first blank options are ( an increase/a
ID: 1198217 • Letter: M
Question
May i please get help with this question
first blank options are ( an increase/a decrease)
second blank (a decrease/ an increase)
second to last blank options are(slower/faster)
Thank you very much
5. Impact of budget deficits The following graph shows the demand for loanable funds and the supply of loanable funds in the United States. At the current equilibrium, the government is experiencing a balanced budget. Assume that the U.s. government bails out several troubled banks without increasing taxes, creating a budget deficit. Show the effect of the budget deficit on the market for loanable funds by shifting the demand (D) curve, the supply (S) curve, or both. LOANABLE FUNDS Based on this model, the budget deficit leads to in the level of investment and in the interest rate. Which of the following arguments would a supporter of a balanced budget make, in addition to the effects a budget deficit can have on interest rates? Check all that apply Budget deficits place a burden on future taxpayers. Budget deficits crowd out private investment. O An individual's share of the government debt represents only a small portion of his or her lifetime earnings. Budget deficits increase national saving Proponents of a balanced budget argue that the government's budget deficit cannot grow forever, but critics believe that this is not necessarily the case. They argue that what matters is the size of the debt relative to the nation's income. For example, suppose that real output in the United States grows at approximately 3%. If the inflation rate is 2% per year, this means that nominal income must be growing at a rate of also rises. Therefore, as long as the nation's income grows collapsing the economy. In this case, the nominal government debt can rise by per year. Because nominal income grows over time, the nation's ability to pay back the national debt than the government debt, the level of debt can continue to increase without %| each year without increasing the debt-to-income ratio.Explanation / Answer
a decrease in the level of investment and an increase in the interest rate.
See,
when the market is in equilibrium, i.e. when the balanced budget exists,then,
the total demand for loanable funds = total supply of loanable funds
We know the private investors demand for loanable funds and banks supply them.
Now, assuming that,
when the US Govt helps the banks , means there was an excess of supply of loanable funds which led to the problems for the banks. But Govt through budget deficit solve the bank's problem and brought the supply of loanable funds to the equilibrium.
Thus based on this model , budget deficit leads to
a decrease in the level of investment and an increase in the interest rate.
Last answer for the blank,
As nation's income grows faster than the government debt , the level of debt can continue to increase without collapsing the economy.