A Decrease in the Government's Budget Deficit Will

question 25

Multiple Choice

A decrease in the government's budget deficit will

• A) increase the supply of loanable funds,lower the interest rate,and increase investment spending
• B) reduce the supply of loanable funds,raise the interest rate,and reduce investment
• C) increase the demand for loanable funds,raise the interest rate,and reduce investment spending
• D) reduce the demand for loanable funds,lower the interest rate,and increase investment spending
• E) increase the supply of loanable funds,reduce the demand for loanable funds,leave the interest rate unchanged,and increase investment spending

---

Definitions:

Derived Demand

The demand for a good or service that arises from the demand for another good or service. For example, the demand for steel is derived from the demand for cars.

Factor Market

A market where factors of production (such as labor, capital, and land) are bought and sold, different from markets for goods and services.

Marginal Productivity Theory

An economic theory that explains the determination of wages in the factor market, based on the productivity of the marginal unit of labor or other factors of production.

Human Capital

The collective skills, knowledge, or other intangible assets of individuals that can be used to create economic value.