If we were to change the interpretation of the term "loanable funds" in such a way that government budget deficits would affect the demand for loanable funds, rather than the supply of loanable funds, then
A)crowding out would not be a consequence of an increase in the budget deficit.
B)higher interest rates would not be a consequence of an increase in the budget deficit.
C)an increase in the budget deficit would cause the demand for loanable funds to decrease.
D)we would be making only a semantic change in how we analyze the effects of government budget deficits.

Question

Quizplus · Accepted Answer

Changing the interpretation of how government budget deficits affect the loanable funds market (from affecting supply to affecting demand) does not alter the underlying economic mechanisms or outcomes; it merely changes the terminology used to describe these processes.

If We Were to Change the Interpretation of the Term