Figure 13-4. On the horizontal axis of the graph, L represents the quantity of loanable funds in billions of dollars.
-Refer to Figure 13-4. Which of the following events could explain a shift of the demand-for-loanable-funds curve from $D _ { 1 }$ to $D _ { 2 }$ ?
A)The tax code is reformed to encourage greater saving.
B)The tax code is reformed to encourage greater investment.
C)The government starts running a budget deficit.
D)The government starts running a budget surplus.

Question

Figure 13-4. On the horizontal axis of the graph, L represents the quantity of loanable funds in billions of dollars. 
-Refer to Figure 13-4. Which of the following events could explain a shift of the demand-for-loanable-funds curve from $D _ { 1 }$ to $D _ { 2 }$ ?
A)The tax code is reformed to encourage greater saving. 
B)The tax code is reformed to encourage greater investment. 
C)The government starts running a budget deficit. 
D)The government starts running a budget surplus.

Quizplus · Accepted Answer

A shift from $D_1$ to $D_2$ in the demand-for-loanable-funds curve indicates an increase in demand for loanable funds. This could be explained by a reform in the tax code that encourages greater investment, as it would increase the demand for funds to finance new investments.

Figure 13-4 D1D _ { 1 }D1​ To D2D _ { 2 }D2​

Figure 13-4 $D _ { 1 }$ To $D _ { 2 }$