330HW _3.07 - what happens when there is an increase in the...

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NAME_________________________ ECON 330- Loanable Funds Worksheet HW/Quiz #3 1. Draw a loanable funds diagram depicting equilibrium in the loanable funds market (label axis) (1) 2. Now suppose there is an increase in the government deficit financed by the Treasury issuing new bonds. Show what this will do to the demand and/or supply in the above diagram.(Indicate the appropriate shifts with arrows.) (2) 3 What has happened to the equilibrium interest rate? (Has it gone up or down?) (1) 4. Now draw a bond market diagram showing at first an equilibrium in the bond market and then
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Unformatted text preview: what happens when there is an increase in the government deficit financed by a new bond issue. as in #3. (What happened to equilibrium bond price?) (2) 5. Now give an example of something that would increase the equilibrium interest rate (other than a change in the government deficit/surplus). (2) Illustrate below how the change you suggest would change bonds prices/or interest rates using either a loanable funds diagram or a bond market diagram to illustrate (2)....
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330HW _3.07 - what happens when there is an increase in the...

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