Use market for loanable funds approach that we developed in class to explain what happens to national saving, private saving, private investment spending, and the rate of interest if the following events occur.
a. The government reduces the size of its budget deficit to zero by reducing government spending.
b. Because of some uncertainty about future, at any interest rate consumers decide to save more.
c. Because of a new wave of technical change, businesses become very optimist about the profitability of their investments.