When the government increases its demand for loanable funds, it causes the demand:
A) for loanable funds curve to shift to the right, which increases interest rates.
B) for loanable funds curve to shift to the left, which increases interest rates.
C) of loanable funds curve to shift to the right, which decreases interest rates.
D) 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 creates a shift in the demand for loanable funds curve to the right. This increases interest rates as lenders are willing to lend at higher interest rates in order to supply the increased demand.

When the Government Increases Its Demand for Loanable Funds, It