What happens to the supply of loanable funds when a government increases its borrowing due to a larger budget deficit?

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The supply curve of loanable funds moves to the rightThe demand curve for loanable funds shifts leftwardThe demand for loanable funds shifts toward the rightThe supply curve of loanable funds shifts to the leftNo change occurs in the loanable funds market

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.