When the U.S. government runs a deficit, the savings curve in the market for loanable funds shifts to the _______, _______ interest rates and _______ domestic investment and net capital outflow.
A) left; increasing; decreasing
B) left; decreasing; increasing
C) right; decreasing; increasing
D) right; increasing; increasing

Question

Quizplus · Accepted Answer

When the U.S. government runs a deficit, it borrows from the savings in the economy, effectively reducing the amount of savings available for investment. This shifts the savings curve to the left, leading to higher interest rates. Higher interest rates, in turn, decrease domestic investment and net capital outflow.