曼昆经济学原理Chapter26.ppt

Policy 3: Budget Deficit/Surplus Government starts with balanced budget Then, starts running a budget deficit Decrease in the public saving Decrease in supply of loanable funds Supply curve shifts left New equilibrium Higher interest rate smaller quantity of loanable funds Decrease in (private) investment: Crowding out Results from government borrowing Government - budget deficit Interest rate rises Investment falls * ? 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Figure 4 * ? 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. The Effect of a Government Budget Deficit Interest Rate Loanable Funds (in billions of dollars) 0 Supply, S1 Demand 5% $1,200 When the government spends more than it receives in tax revenue, the resulting budget deficit lowers national saving. The supply of loanable funds decreases, and the equilibrium interest rate rises. Thus, when the government borrows to finance its budget deficit, it crowds out households and firms that otherwise would borrow to finance investment. Here, when the supply shifts from S1 to S2, the equilibrium interest rate rises from 5 to 6 percent, and the equilibrium quantity of loanable funds saved and invested falls from $1,200 billion to $800 billion. S2 6% $800 1. A budget deficit decreases the supply of loanable funds . . . 3. . . . and reduces the equilibrium quantity of loanable funds. 2. . . . which raises the equilibrium interest rate . . . Policy 3: Budget Deficit/Surplus Government – budget surplus Increase supply of loanable funds Reduce interest rate Larger quantity of loanable funds Stimu