Figure 32-3

-Refer to Figure 32-3.Suppose that the government goes from a budget surplus to a budget deficit.The effects of the change could be illustrated by
A)shifting the demand curve in panel a to the right and the demand curve in panel c to the left.
B)shifting the demand curve in panel a to the left and the supply curve in panel c to the left.
C)shifting the supply curve in panel a to the right and the demand curve in panel c to the right.
D)shifting the supply curve in panel a to the left and the supply curve in panel c to the left.

Question

Figure 32-3
 
-Refer to Figure 32-3.Suppose that the government goes from a budget surplus to a budget deficit.The effects of the change could be illustrated by
A)shifting the demand curve in panel a to the right and the demand curve in panel c to the left. 
B)shifting the demand curve in panel a to the left and the supply curve in panel c to the left. 
C)shifting the supply curve in panel a to the right and the demand curve in panel c to the right. 
D)shifting the supply curve in panel a to the left and the supply curve in panel c to the left.

Quizplus · Accepted Answer

A budget deficit implies the government is borrowing more, reducing the supply of loanable funds, which shifts the supply curve to the left in both panels.

Figure 32-3 -Refer to Figure 32-3.Suppose That the Government Goes from a Government