a. What and why might a negative impact on investment spending occur when the federal government expenditures become far greater than tax collections. (Your answer should refer to the injections equal leakages equation. Your answer should also address the negative impact on the multiplier process.)
b. Under the scenario above, describe what happens in the loanable funds market. (Your answer should refer to supply and demand curves and the change in equilibrium in the loanable funds model.)
c. How is international finance impacted under the same scenario as ‘a’ and ‘b’ above. (Your answer should refer to supply and demand curves and the change in equilibrium in the foreign exchange market model. Your answer should also refer to the balance of payments.)
Remember that your goal is to demonstrate how the questions’ answer connects to what you are learning. Write a very thorough answer to each question.
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