The International Monetary Fund (IMF) reported that it acted effectively in combating the global recession. Since September 2008, the IMF made $163 billion available to developing countries. While the IMF urged developed countries and China to run deficits to stimulate their economies, the IMF required developing countries with large deficits to cut spending and not increase spending.
a. Explain how increased government budget deficits change the loanable funds market.
b. Would the global recession have been less severe had the IMF made larger loans to developing countries?