Refer to Figure 10-6. The market is in equilibrium. If the ...

[scienceeasy]

Refer to Figure 10-6. The market is in equilibrium. If the government budget deficit rises, which of the following would you expect to see?
 
  A) The budget deficit will have no impact on the quantity of loanable funds demanded by firms.
  B) The quantity of loanable funds demanded by firms will rise above 120 million.
  C) The interest rate will fall below 4 percent.
  D) The quantity of loanable funds demanded by firms will fall below 120 million.

Question 2

Suppose a player has a dominant strategy. Would she choose to play a mixed strategy (such as playing two strategies with probability 50-50)? Why or why not?
 
  What will be an ideal response?

[sarajane1989]

Answer to Question 1

D

Answer to Question 2

A dominant strategy is one best response to every possible strategy of the other player. A game with mixed strategies implies that the best action is to not choose any particular strategy. This means that, in a game with mixed strategies, neither player has a dominant strategy.

[scienceeasy]

Excellent

[ricroger]

Thanks for the timely response, appreciate it