If a country went from a government budget deficit to a surplus, which of the following best predicts the consequences?
A)National savings would increase, shifting the supply of loanable funds right.
B)National savings would increase, shifting the supply of loanable funds left.
C)National savings would decrease, shifting the demand for loanable funds right.
D)National savings would decrease, shifting the demand for loanable funds left.

Question

Quizplus · Accepted Answer

A government budget surplus means that the government is spending less than it is collecting in revenue. This reduces the government's demand for loanable funds, which increases national savings and shifts the supply of loanable funds to the right. This, in turn, can lead to lower interest rates and more investment, which can stimulate economic growth.

If a Country Went from a Government Budget Deficit to a Surplus