Please answer each of the following questions in 3–5 lines. No credit will be given without a proper explanation.

a) During

COVID-19, the Australian government substantially increased its expenditure

(such as the JobKeeper package). As a result, the government deficit is

expected to persist for a while. What are the consequences of this on the

loanable funds market?

b) Alan

Greenspan proposed the "saving glut" hypothesis, which argues that

excess savings from East Asian economies (such as China) flowed rapidly into

the U.S. economy in the 2000s. What was the effect of this saving glut on the U.S. loanable funds market? (2 marks)