Which of the following statement regarding the loanable funds market is true?
A) A decrease in the government budget deficit increases the real interest rate.
B) An increase in the government budget deficit shifts the supply of loanable funds to the right.
C) An increase in private saving shifts the supply of loanable funds to the left.
D) An increase in the government budget deficit shifts the supply of loanable funds to the left.

Question

Quizplus · Accepted Answer

An increase in the government budget deficit typically reduces the supply of loanable funds available for private investment, shifting the supply curve to the left, as the government borrows more from the financial markets.

Which of the Following Statement Regarding the Loanable Funds Market