Figure 16.3
-Refer to Figure 16.3.As a result of an increase in the government budget deficit,the ________ for loanable funds will ________,thereby ________ the equilibrium real interest rate and ________ the equilibrium quantity of loanable funds.

Question

Figure 16.3 
-Refer to Figure 16.3.As a result of an increase in the government budget deficit,the ________ for loanable funds will ________,thereby ________ the equilibrium real interest rate and ________ the equilibrium quantity of loanable funds.

Quizplus · Accepted Answer

An increase in government budget deficit increases the demand for loanable funds, which shifts the demand curve to the right. This leads to an increase in the equilibrium interest rate and a decrease in the equilibrium quantity of loanable funds. Therefore, the correct option is D, where supply falls, interest rates increase, and the equilibrium quantity of loanable funds decreases.

Figure 16.3 -Refer to Figure 16.3.As a Result of an Increase in an Increase