Figure 32-5
Refer to this diagram of the open-economy macroeconomic model to answer the questions below.

-Refer to Figure 32-4.Suppose that the government goes from a budget surplus to a budget deficit.The effects of the change could be illustrated by
A)shifting the demand curve in panel a to the right and the demand curve in panel c to the left.
B)shifting the demand curve in panel a to the left and the supply curve in panel c to the left.
C)shifting the supply curve in panel a to the right and the demand curve in panel c to the right.
D)shifting the supply curve in panel a to the left and the supply curve in panel c to the left.

Question

Figure 32-5
Refer to this diagram of the open-economy macroeconomic model to answer the questions below.

-Refer to Figure 32-4.Suppose that the government goes from a budget surplus to a budget deficit.The effects of the change could be illustrated by
A)shifting the demand curve in panel a to the right and the demand curve in panel c to the left. 
B)shifting the demand curve in panel a to the left and the supply curve in panel c to the left. 
C)shifting the supply curve in panel a to the right and the demand curve in panel c to the right. 
D)shifting the supply curve in panel a to the left and the supply curve in panel c to the left.

Quizplus · Accepted Answer

A budget deficit implies the government is borrowing more, reducing the supply of loanable funds, which shifts the supply curve to the left in both panels.

Figure 32-5 Refer to This Diagram of the Open-Economy Macroeconomic Model to Model