Answered: Market for Loanable Funds S D Quantity…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Collaboration with Congress during the Clinton Administration allowed for an aggressive deficit-cutting plan to pass. As a result, the government was able to reach a balanced budget at the end of the 90's.

Move the supply and/or demand curves to describe the expected effect that this deficit-reduction likely had upon the loanable funds market.

As a result, private investment should have

a) decreased as the cost of borrowing increased.

b) increased as the cost of borrowing increased.

c) increased because the cost of borrowing decreased.

d) decreased as the cost of borrowing decreased.

Market for Loanable Funds
S
D
Quantity of loanable funds
Interest rate

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