Figure 29-1
-Refer to Figure 29-1. Suppose that the U.S. government deficit decreases, causing interest rates in the United States to fall relative to those in the European Union. Assuming all else remains constant, how would this be represented?
A) Supply would decrease, demand would increase and the economy moves from A to D to C.
B) Demand would decrease and the economy moves from B to A.
C) Demand would increase and the economy moves from A to B.
D) Supply would increase, demand would increase and the economy moves from D to A to B.

Question

Figure 29-1 
-Refer to Figure 29-1. Suppose that the U.S. government deficit decreases, causing interest rates in the United States to fall relative to those in the European Union. Assuming all else remains constant, how would this be represented?
A) Supply would decrease, demand would increase and the economy moves from A to D to C. 
B) Demand would decrease and the economy moves from B to A. 
C) Demand would increase and the economy moves from A to B. 
D) Supply would increase, demand would increase and the economy moves from D to A to B.

Quizplus · Accepted Answer

A decrease in U.S. interest rates relative to the European Union would lead to a decrease in demand for U.S. assets, causing the demand curve to shift left, moving the economy from point B to point A.

Figure 29-1 -Refer to Figure 29-1. Suppose That the U.S. Government Deficit