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Loanable Funds (Expansionary Monetary and Contractionary Fiscal)

APMACR-NDHKCD

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

A

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

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 increase.

D

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

E

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