Question

Think of the market for loanable funds. A policy that induces people to save more or that reduces the governmet's budget deficit (moves it more toward a surplus) shifts the supply of loanable funds and raises interest rates. The supply of loanable funds and reduces interest rates. The demand for loanable funds and raises interest rates . The demand for loanable funds and reduces interest rates.

Answer 1

shifts the supply of loanable funds and reduces interest rates.

Step-by-step explanation:

The supply and demand curves of money (loanable funds) work in the same way as every other good or service. When the supply of a good or service increases, the supply curve shifts to the right, increasing total quantity supplied and decreasing equilibrium price. When we are talking about loans, the equilibrium price is the interest rate.