Use the following diagram to answer the following questions.

-Refer to Loanable Funds. An increase in the federal budget deficit financed by issuing U.S. Treasury bonds would most likely:

Question

Use the following diagram to answer the following questions.
 
-Refer to Loanable Funds. An increase in the federal budget deficit financed by issuing U.S. Treasury bonds would most likely:

Quizplus · Accepted Answer

An increase in the federal budget deficit financed by issuing U.S. Treasury bonds would increase the supply of loanable funds, which would shift the supply curve to the right, causing the equilibrium rate of interest to fall and the equilibrium quantity of funds supplied to increase. This, in turn, would cause the demand for loanable funds to increase, shifting the demand curve from D₁ to D₂.

Use the Following Diagram to Answer the Following Questions