Question: macroeconomics hi teacher please write your answers here i have...
Hi teacher please write your answers here, I have some problem reading some of your handwritings. Thank you!
Suppose, the government of Australia incurs a budget deficit of $50 billion due to increased government spending in 2020 as result of Covid 19. Because of this, the government borrowing in 2021 increases by the same amount.
a A ) Show this development using a graph representing the market for loanable funds for Australia. Explain in writing the effect of this on interest rates (4 marks).
Graph (3 marks)
Effect on interest rate (1 mark)
a B) Compare the size of equilibrium changes in 1) investment, 2) public saving, 3) private saving and 4) national saving (public saving + private saving) with $50 billion increase in borrowing. Compare the changes (increase/decrease) in these variables indicating same, less or more than the $50 billion. (4 marks)
C) Will the equilibrium quantity of national savings change by more or less than the initial change in public saving? Explain your answer (in 50 words or less) (2 marks)