Macroeconomics 11th Edition by Michael Parkin

Exercise 3

After you have studied Reading Between the Lines pp. 176-177 on below, answer the following questions.
a. What is the "fiscal cliff"?
b. How does a government budget deficit influence the loanable funds market
c. How does a decrease in the government budget deficit influence the loanable funds market in a recession
d. How does a decrease in the government budget deficit influence the loanable funds market at full employment
e. If when the United States hit its "fiscal cliff," the governments in Europe, China, and Japan also were to cut their budget deficits, what would happen to the world interest rate, saving, and investment
f. If when the United States hit its "fiscal cliff," the governments in Europe, China, and Japan were to increase their budget deficits, what would happen to the world interest rate, saving, and investment