Changes in U.S. Treasury securities holdings on interest rate using loanable funds theory and Keynesian cross diagram.
a. Use the loan able funds theory of interest rate to answer this problem. Suppose that the demand for U.S. Treasury securities by the rest of the world falls while the supply of United States Treasury securities rises because of a rise in the budget deficit. describe how the effect on the interest rate.
b. With the help of a Keynesian cross diagram, describe the effect on the goods and services market.