After you have studied Economics in the News on pp. 174-175, answer the following questions.
A. Why does the news article say that bond prices and interest rates move in opposite directions? Is it correct? Explain.
B. How does a government budget deficit influence the loanable funds market and why does a decrease in the deficit lower the real interest rate?
C. When an economic expansion gets going, what happens to the demand for loanable funds and the real interest rate?
D. If an expanding economy increases government tax revenue, how will that affect the loanable funds market and the real interest rate?
E. Looking at Fig. 1 on p. 175, what must have happened to either the demand for or the supply of loanable funds during 2011, 2012, and 2013?