The supply of loanable funds increases. A. when the demand for loanable funds in

Question

The supply of loanable funds increases. A. when the demand for loanable funds increases B. when people increase saving as the real interest rate rises C. when disposable income increases or wealth decrease D. if net taxes decrease or expected future income increases 5. An increase in expected profit the real interest rate and quantity of loanable funds. A. decreases; decreases B. increases; decreases C. decreases; increases D. increases; increases 6. A government budget surplus. A. increases the supply of loanable funds B. raises the real interest rate C. decreases the demand for loanable funds and lowers the real interest rate D. decreases net taxes, increases disposable income, and increases saving 7. Crowding out occurs when. A. households' budgets are in deficit and saving decreases B. the government budget is in surplus, so people have paid too mud tax C. the government budget is in deficit and the real interest rate rises D. the government budget is in deficit but taxpayers are rational and the Ricardo-Barro effect operates 8. An increase in the government budget deficit. A. increases private saving and investment B. increases private saving and decreases investment C. increases the supply of private saving and decreases investment D. decreases private saving and investment

Explanation / Answer

4.

Correct Answer:

B. when people increase saving as the real interest rate rises

Explanation:

With the increase in real interest rate, people find that saving for the future is more beneficial than the spending of funds today. Thus, saving component of the disposable income increases that results in the increased supply of loanable funds.

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