The graph above shows the loanable funds market for a country.
a. Assume that now the country’s government increases deficit spending. Explain how the increase in deficit spending will affect the real interest rate.
b. Indicate how the real interest rate change you identified in part (a) will affect investment in plant and equipment.
c. Explain how the real interest rate change you identified in part (a) will affect long-term economic growth.
- Determine the fiscal policy consistent with counteracting recessionary and inflationary gaps
- Analyze how government debt impacts the economy
- Identify how the Federal Reserve uses monetary policy as a means to achieve macroeconomic goals
- Construct a flow map describing the various monetary policies used by the Fed and their impact on the money supply.
III Review: Money Growth and Inflation- Macro Topic 5.3
ILearn: 5.3- Money Growth and Inflation
Ap Classroom: Money Growth and Inflation