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Transcript
Loanable Funds Market -Government Spending Leads to the Loanable Funds Market -Represents money in commercial banks and lending institutions that is available to finance investment or consumption 2010 AP Macroeconomics FRQ • (d) In order to finance the increase in government spending on national defense from part (b), the government borrows funds from the public. Using a correctly labeled graph of the loanable funds market, show the effect of the government’s borrowing on the real interest rate. • Given the change in the real interest rate in part (d), what is the impact on each of the following? – (i) Investment – (ii) Economic growth rate. Explain.
