If a country went from a government budget deficit to a surplus,national saving would
A)increase,shifting the supply of loanable funds right.
B)increase,shifting the supply of loanable funds left.
C)decrease,shifting the demand for loanable funds right.
D)decrease,shifting the demand for loanable funds left.

Question

Quizplus · Accepted Answer

If a country goes from a government budget deficit to a surplus, it means that the government is spending less than it is collecting in revenue. This reduces the demand for loanable funds because the government is no longer borrowing to finance its spending. As a result, the supply of loanable funds increases, which means that national saving increases. Therefore, the correct answer is A.

If a Country Went from a Government Budget Deficit to a Surplus,national