In 2008, Australia had a government budget surplus of $21.7 billion. This budget surplus shifts the demand for loanable funds curve

Question

Quizplus · Accepted Answer

A government budget surplus increases the supply of loanable funds, not demand. This would typically lower the real interest rate by shifting the supply curve rightward, not the demand curve. However, none of the options correctly describe this dynamic. The closest option, given the misunderstanding in the question's premise, is A, as it suggests a decrease in the real interest rate, which aligns with the effects of a surplus indirectly. However, the direction of the shift it suggests for the demand curve is incorrect based on standard economic theory.

In 2008, Australia Had a Government Budget Surplus of $21