An increase in a country's budget surplus shifts its
A)demand for loanable funds right and decreases investment spending.
B)supply of loanable funds right and increases investment spending.
C)supply of loanable funds left and decreases investment spending.
D)None of the above is correct.

Question

Quizplus · Accepted Answer

When a country's budget surplus increases, it means they are spending less than they are earning. This results in an increase in the supply of loanable funds, as the government is able to lend more. This increase in the supply of loanable funds tends to decrease interest rates, which in turn increases investment spending. Therefore, an increase in a country's budget surplus shifts its supply of loanable funds right and increases investment spending.

An Increase in a Country's Budget Surplus Shifts Its