Answer to Question #229048 in Macroeconomics for Priest

Question

When government becomes a lender in the loanable funds market: 

(i) The supply of funds increases, and the interest rate decreases.

(ii) The supply of funds increases, and the interest rate increases.

(iii) The supply of funds decreases, and the interest rate decreases. 

(iv) The supply of funds decreases, and the interest rate increases.

A. only (i) is correct.

B. (i) and (ii) are correct.

C. only (iii) is correct.

D. (ii) and (iv) are correct.

Answer 1

D. (ii) and (iv) are correct.