1. If there is an increase in the government budget deficit: A) the demand for l

Question

1. If there is an increase in the government budget deficit:
A) the demand for loanable funds will increase, interest rates will increase, and the amount of borrowing will increase.
B) the demand for loanable funds will decrease, interest rates will decrease, and the amount of borrowing will decrease.
C) the supply of loanable funds will increase, interest rates will decrease, and the amount of borrowing will increase.
D) the supply of loanable funds will decrease, interest rates will increase, and the amount of borrowing will decrease.

Explanation / Answer

D) the supply of loanable funds will decrease, interest rates will increase, and the amount of borrowing will decrease.

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