When the government increases its demand for loanable funds,it causes:
A)the demand for loanable funds curve to shift to the right,which increases interest rates.
B)the demand for loanable funds curve to shift to the left,which increases interest rates.
C)the demand of loanable funds curve to shift to the right,which decreases interest rates.
D)the demand of loanable funds curve to shift to the left,which decreases interest rates.

Question

Quizplus · Accepted Answer

When the government increases its demand for loanable funds, it means that the government needs to borrow more money. This will shift the demand for loanable funds curve to the right. As a result, interest rates will increase because there are now more borrowers looking to borrow money than there are lenders willing to lend it. The increased competition for loanable funds drives up the price (which is the interest rate) of those funds.

When the Government Increases Its Demand for Loanable Funds,it Causes