Suppose Malaysian government moves to reduce a budget deficit. 

(a) Using the long‐run model of the economy graphically illustrate the impact of reducing a government's budget deficit by reducing government purchases.  

(b) State in words what happens to:                                

i. the real interest rate; 

ii. national saving;  

iii. investment;  

iv. consumption; and output. 

Answer rating: 100% (QA)

The detailed answer for the above question is provided below a In the longrun model of the economy an economy is depicted in terms of supply and deman... View the full answer