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AP® Macroeconomics

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Moderate

Loanable Funds (Expansionary Policies)

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

A

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

B

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

C

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

D

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

E

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