Macmillan Learning
O
Adjust the graph to show how an increase of $25.8 billion
dollars in the government's budget deficit affects this
loanable funds market, holding all else equal.
Select the answer that describes the adjustment in the
loanable funds market.
Market for Loanable Funds
The deficit decreases the demand for
loanable funds and shifts the demand curve
to the left, decreasing the interest rate and
crowding out investment spending.
The deficit increases national savings and
shifts the supply curve to the right, decreasing
the interest rate and crowding out investment
spending.
The deficit increases the demand for loanable
funds and shifts the demand curve to the
right, increasing the interest rate and
crowding out investment spending.
The deficit decreases national savings and
shifts the supply curve to the left, increasing
the interest rate and crowding out investment
spending.
Interest rate
Quantity of loanable funds (billions of S)