Go to the web site of the Federal Reserve Bank of St. Louis (FRED) (fred.stlouisfed.org) and find the most recent value and the value from the same quarter four years earlier for Gross Government Saving (GGSAVE).
a. Total gross saving in the economy is composed of gross private saving and gross government saving. What does gross government saving represent?
b. Using the values you found, explain whether the government budget was balanced, in a surplus, or in a deficit during these two quarters. From the first period to the most recent period, has government saving increased, decreased, or remained constant?
c. Draw a graph to show the loanable funds market in equilibrium. Assuming gross private saving remains constant and given your answer in part (b), show the effect on the loanable funds market. Explain what will happen to the level of investment in the economy.