Suppose that Chile has a budget surplus,and then goes into deficit.Which statement best predicts the consequences?
A) National saving would increase,and Chile's supply of loanable funds would shift to the left.
B) National saving would increase,and Chile's demand for loanable funds would shift to the right.
C) National saving would decrease,and Chile's supply of loanable funds would shift to the left.
D) National saving would decrease,and Chile's demand for loanable funds would shift to the right.

Question

Quizplus · Accepted Answer

A budget surplus occurs when a country saves more than it spends, which increases national saving. When Chile goes into deficit, it means it is spending more than it saves, so national saving would decrease. The decrease in national saving would result in a decrease in Chile's supply of loanable funds, shifting the supply curve to the left. Therefore, the correct option is C.

Suppose That Chile Has a Budget Surplus,and Then Goes into Deficit.Which