The Congressional Budget Office reported that federal budget ...

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The Congressional Budget Office reported that federal budget deficits in the United States were likely to increase in future years, and these higher deficits might pose a threat to the economy by crowding out business investment and threatening a
 
  spike in interest rates. This higher budget deficit would be represented graphically by
  A) a shift in the supply curve for loanable funds to the right.
  B) a movement to the right along the supply curve for loanable funds.
  C) a shift in the supply curve for loanable funds to the left.
  D) a movement to the left along the supply curve for loanable funds.

Question 2

How do governments use spending and taxation to reduce inequality and poverty in an economy?
 
  What will be an ideal response?

[angrybirds13579]

Answer to Question 1

C

Answer to Question 2

The government uses progressive taxation and transfer payments in order to reduce inequality and poverty in the economy. Transfer payments refer to payments from the government to certain individual groups, such as the elderly or the unemployed. Social security, Medicare, and Supplemental Security Income are all examples of transfer payments. A progressive tax system is one in which marginal tax rates increase as incomes increase, so that the rich face higher marginal tax rates than the less well-to-do.