AP® Macroeconomics

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Loanable Funds (Contractionary Monetary and Expansionary Fiscal)

APMACR-IYX3HA

What will be the short-run effects on the real interest rates and the quantity of loanable funds if the government combines both contractionary monetary policy and expansionary fiscal policy?

A

The interest rates will increase and quantity of loanable funds will decrease.

B

The interest rates will decrease and the quantity of loanable funds will increase

C

The interest rates are indeterminate and the quantity of loanable funds will decrease.

D

The interest rates will increase and the quantity of loanable funds are indeterminate.

E

The interest rates are indeterminate and the quantity of loanable funds will increase.