Question

Part 1

Suppose the government increases the tax rate on interest income. What do you expect to happen in the market for loanable funds?

The equilibrium interest rate will rise and the equilibrium quantity of loanable funds will fall

The equilibrium interest rate will rise and the equilibrium quantity of loanable funds will rise

The equilibrium interest rate will fall and the equilibrium quantity of loanable funds will fall

The equilibrium interest rate will fall and the equilibrium quantity of loanable funds will rise

Part 2

Suppose the United State government begins running a budget deficit. Which of the following is correct?

The supply of loanable funds shifts left

The supply of loanable funds shifts right

The demand for loanable funds shifts left

The demand for loanable funds shifts right

Answer 1