Question 1

Which of the following graphs best represents the effect of a government budget deficit on the market for loanable funds?

Accepted Answer

Graph 1: The supply curve shifts to the left from $S_1$ to $S_2$.

Question 2

Suppose a new technology makes investment more profitable for firms. Which graph best illustrates the resulting change in the market for loanable funds?

Accepted Answer

Graph 4: The demand curve shifts to the right from $D_1$ to $D_2$.

Question 3

If households decide to save less at every interest rate, which graph best represents the change in the market for loanable funds?

Accepted Answer

Graph 1: The supply curve shifts to the left from $S_1$ to $S_2$.

Question 4

Which graph best illustrates the effect of a decrease in expected future profitability of investment on the market for loanable funds?

Accepted Answer

Graph 5: The demand curve shifts to the left from $D_1$ to $D_2$.

Question 5

If the government increases its budget surplus, which graph best represents the effect on the market for loanable funds?

Accepted Answer

Graph 3: The supply curve shifts to the right from $S_1$ to $S_2$.

Macroeconomic Principles: Core Concepts and the Loanable Funds Market

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