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Consider the loanable funds market. Suppose that this market is initially in equilibrium. Analyze the impact on the quantity of loanable funds available in this market, and the effect it has on the interest rate for these loanable funds for each of the following scenarios.
a. Assume that the government has increased the size of its deficit relative to the initial level of the deficit.
b. Assume that the government increases its tax collections while reducing its government expenditures.
c. Assume that the initially the economy had a trade balance but now the economy runs a large trade surplus.
d. Assume the government runs a budget surplus and at the same time the economy has a trade deficit. Does the way you analyze this scenario alter your analysis? Be specific in your answer.
e. Assume that private savings increases at every interest rate and at the same time the government moves from a balanced budget to a budget deficit (model this budget deficit on the demand side of the model).
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