Suppose that government expenditures on goods and services and net taxes both decrease,but that expenditures fall by more than net taxes.The effects of these changes on the budget deficit make

Question

Quizplus · Accepted Answer

When government expenditures on goods and services and net taxes both decrease, but expenditures fall by more than net taxes, the budget deficit decreases. This means that the government is borrowing less money, which reduces the demand for loanable funds. As a result, the interest rate falls and the equilibrium quantity of loanable funds rises.

Suppose That Government Expenditures on Goods and Services and Net