Use the Following Diagram to Answer the Following Questions

question 12

Multiple Choice

Use the following diagram to answer the following questions.

-Refer to Loanable Funds. An increase in the federal budget deficit financed by issuing U.S. Treasury bonds would most likely:

• A) cause demand to shift from D₂ to D₁.
• B) cause demand to shift from D₁ to D₂.
• C) cause the equilibrium rate of interest to change from i₂ to i₁.
• D) cause the equilibrium quantity of funds supplied to fall.

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Definitions:

Investment Companies

Firms that pool funds from individuals to collectively invest in stocks, bonds, and other securities, offering diversification and professional management.

NAV

Net Asset Value, the total value of a fund's assets minus its liabilities, often used to determine the price of shares in a mutual fund or ETF.

Year-End Assets

The total value of all assets held by an entity at the end of a financial year.

Liabilities

Financial obligations or debts that a company or individual owes to others, which need to be settled over time by transferring economic benefits.