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- Subject
- Stockseconomics-mcqs › stocks
- Published
- 30 May 2019
- Last updated
- 28 May 2026
What happens to the supply of loanable funds when a government increases its borrowing due to a larger budget deficit?
Multiple choice question for Stocks. Select an option, then review the explanation below.
Explanation
When the government borrows more because of a bigger budget deficit, it reduces the amount of funds available for lending, causing the supply of loanable funds to decrease and shift to the left.
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Practice related questions from the same subject.
- 1.What is the effect of an increase in the budget surplus on the market for loanable funds?
- 2.What happens to real interest rates and investment if Pakistani citizens become less future-oriented and reduce their savings at every real interest rate?
- 3.What effect does a rise in the budget deficit have on public savings?
- 4.What is the effect of a larger budget deficit on the real interest rate and the demand for loanable funds used for investment?
- 5.Which combination of government policies is most effective in promoting economic growth?