-If the original equilibrium in the market for loans were shown by point a, the new equilibrium after government borrowing increased and the Federal Reserve monetized this debt would be shown by:

Question

Quizplus · Accepted Answer

When the government borrows more, it increases the demand for loans, shifting the demand curve to the right. If the Federal Reserve monetizes this debt, it increases the money supply, which can shift the supply curve for loans to the right, leading to a new equilibrium at point c.

-If the Original Equilibrium in the Market for Loans Were