How does an increase in the Canadian government budget deficit shift the supply of Canadian loanable funds?
A)The supply of loanable funds curve shifts to the right.
B)The supply of loanable funds curve shifts to the left.
C)The supply of loanable funds does not change.
D)The change in the supply of loanable funds is ambiguous.

Question

Quizplus · Accepted Answer

An increase in the Canadian government budget deficit means that the government will need to borrow more funds from the private sector, decreasing the supply of loanable funds available to other borrowers. Therefore, the supply of loanable funds curve shifts to the left.

How Does an Increase in the Canadian Government Budget Deficit