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August 20, 2014

Homework Help: Macroeconomics

Posted by Jonathan on Thursday, October 2, 2008 at 12:57pm.

I have an assignment question regarding the impact of reducing the government's budget deficit by reducing government purchases.

I have to develop a S/D graph with curves to illustrate this impact.

I know that when the government makes purchases and runs a deficit, supply of investments and savings (loanable funds) shifts left.

When the government reduces purchases, does the demand curve shift left or does the supply curve shift back to the right?

Also what is the shifting for an income tax increase to lower the budget deficit?

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