Pretend for moment you are teaching this class and you need to write questions for an exam covering this chapter. Write three short answer questions and give 2 answers for each — an adequate response and a very good response. Your questions should cover highlights from the chapter. Don’t choose identification or list questions, require some analysis. A answers are generally longish.
- How would a budget deficit affect unemployment?
- What sources supply in the market for loanable funds?
- Long run affect of a budget deficit?
Answers: 1. Government spending will increase leading to more output. The demand for workers will increase so unemployment falls
2. Business’ Investments or firms, household, and consumers are some. The majority of the demand for loanable funds comes from business firms who borrow money for purchasing or making new capital goods. The second biggest demand comes from individuals who want to borrow for purchasing purposes such as auto loans, appliances, etc.
3. Increases national debt, higher taxes and lower government spending, and increased interest rates to slower economy.
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