Author Question: What happens to national saving when the government runs a budget surplus? What happens to national ... (Read 124 times)

crazycityslicker · **on:** Jun 29, 2018

What happens to national saving when the government runs a budget surplus? What happens to national saving when the government runs a budget deficit?

What will be an ideal response?

Question 2

Which is likely to be more elastic: the demand for orange juice or the demand for a particular brand of orange juice? Explain.

What will be an ideal response?

catron30 · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

National saving increases when the government runs a budget surplus unless private saving decreases by the amount of the budget surplus, which is unlikely. National saving decreases when the government runs a budget deficit unless private saving increases by the amount of the budget deficit, which is also unlikely.

Answer to Question 2

The demand for a particular brand of orange juice will be more elastic. There are many close substitutes (other brands). There are fewer substitutes for orange juice.