How does a government budget surplus or deficit influence the loanable funds market? A government budget surplus ____ loanable funds. A. decreases the demand for B. increases the demand for C. increases the supply of D. decreases the supply of
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This means the government is saving money, which can be used to buy bonds. Show more…
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Caroline M.
Other things the same, an increase in the budget deficit A. shifts the supply of loanable funds left, so the interest rate rises. B. shifts the demand for loanable funds right, so the interest rate rises. C. shifts the demand for loanable funds left, so the interest rate falls. D. shifts the supply of loanable funds right, so the interest rate falls.
Jonathan T.
If we were to change the interpretation of the term "loanable funds" in such a way that government budget deficits would affect the demand for loanable funds, rather than the supply of loanable funds, then a. higher interest rates would not be a consequence of an increase in the budget deficit. b. an increase in the budget deficit would cause the demand for loanable funds to decrease. c. crowding out would not be a consequence of an increase in the budget deficit. d. we would be making only a semantic change in how we analyze the effects of government budget deficits.
Akash M.
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