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AP® Macroeconomics

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Deficit Spending and Loanable Funds

APMACR-J1YGED

If the Government runs a deficit then

A

supply of loanable funds decrease and interest rates rise.

B

supply of loanable funds increase and interest rates fall.

C

demand for loanable funds decrease and interest rates fall.

D

demand for loanable funds increase and interest rates rise.

E

loanable funds market is not affected by Government borrowing.