A Government Budget Deficit ________ the Demand for Loanable Funds

question 118

Multiple Choice

A government budget deficit ________ the demand for loanable funds and ________ investment.

• A)increases; increases
• B)increases; decreases
• C)decreases; increases
• D)decreases; decreases
• E)increases; rises or falls depending on the change in the supply of loanable funds

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Definitions:

Value of Money

The purchasing power of monetary units, indicating how much goods or services one unit of money can buy; it generally decreases with inflation.

Money Demand

The desire of households and firms to hold cash for the purposes of transactions, precaution, and speculation.

Surplus of Money

Surplus of Money occurs when the supply of money in an economy exceeds the demand, potentially leading to lower interest rates and increased spending.

Vertical Axis

In a graph or chart, this axis represents the range of values or criteria that are measured upward and downward.