Figure 10-6
-Refer to Figure 10-6.The market is in equilibrium.If the government budget deficit rises,which of the following would you expect to see?

Question

Figure 10-6 
-Refer to Figure 10-6.The market is in equilibrium.If the government budget deficit rises,which of the following would you expect to see?

Quizplus · Accepted Answer

An increase in government budget deficit will increase the demand for loanable funds, shifting the demand curve to the right. This will result in a higher equilibrium interest rate and quantity of loanable funds supplied, but a lower quantity of loanable funds demanded by firms. As a result, the quantity of loanable funds demanded by firms will fall below $120 million.

Figure 10-6 -Refer to Figure 10-6.The Market Is in Equilibrium.If the Government