if-a-government-is-running-a-budget-deficit-what-is-the-likely-impact-on-the-dem

Question

If a government is running a budget deficit, what is the likely impact on the demand for loanable funds and the equilibrium interest rate?

Accepted Answer

Demand for loanable funds will increase, leading to higher interest rates.

Answer

Demand for loanable funds will decrease, leading to lower interest rates.

Answer

Supply of loanable funds will decrease, leading to lower interest rates.

Answer

Supply of loanable funds will increase, leading to higher interest rates.