When the Government Borrows Money

Multiple Choice

When the government borrows money,:

A) the demand for loanable funds increases, which raises interest rates and reduces borrowing by households and business.
B) the demand for loanable funds increases, which lowers interest rates and increases borrowing by households and business.
C) the demand for loanable funds decreases, which lowers interest rates and increases borrowing by households and business.
D) the demand for loanable funds decreases, which raises interest rates and reduces borrowing by households and business.