2. (Figure: Loanable Funds) The accompanying graph shows the market for loanable

Question

2. (Figure: Loanable Funds) The accompanying graph shows the market for loanable funds in equilibrium. Which of the following might produce a new equilibrium interest rate of 8% and a new equilibrium quantity of loanable funds of $150? (in other words what will shift the equilibrium right from $100 to $150 of quantity of loanable funds??
A) Consumers have increased consumption as a fraction of disposable income.
B) Businesses have become more optimistic about the return on investment spending.
C) The federal government has a budget surplus rather than a budget deficit.
D) There has been an increase in capital inflows from other nations.

Explanation / Answer

C) The federal government has a budget surplus rather than a budget deficit.

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