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Now let's consider the effects of a budget deficit in an open economy. First,Herve Leger Cirtrus Mini Skirt yellow,
which curve in our model shifts? As in a closed economy,oakley sunglasses replacement lenses, the initial impact of the
budget deficit is on national saving and,p90x recovery drink, therefore,oakley half wire sunglasses, on the supply curve for loan-
able funds. Second, which way does this supply curve shift? Again as in a closed
economy,buy discount true religion jeans, a budget deficit represents negative public saving, so it reduces national
saving and shifts the supply curve for loanable funds to the left. This is shown as
the shift from S1 to S2 in panel (a) of Figure 30-5.
Our third and final step is to compare the old and new equilibria. Panel (a)
shows the impact of a U.S. budget deficit on the U.S. market for loanable funds.