As a Government Adopts a Contractionary Fiscal Policy

Multiple Choice

As a government adopts a contractionary fiscal policy:

A) the demand for loanable funds increases causing interest rates to rise.
B) the demand for loanable funds decreases causing interest rates to fall.
C) the supply of loanable funds increases causing interest rates to rise.
D) the supply of loanable funds decreases causing interest rates to fall.
E) the supply of loanable funds does not change and interest rates fall.