A Country Initially Has an Equilibrium Real Interest Rate of 4

Multiple Choice

A country initially has an equilibrium real interest rate of 4 percent and an equilibrium quantity of investment of $2 trillion.The government's budget deficit then increases.According to the crowding-out effect, the

A) demand for loanable funds curve shifts leftward, the real interest rate falls, and investment increases.
B) supply of loanable funds curve shifts rightward, the real interest rate rises, and investment increases.
C) demand for loanable funds curve shifts rightward, the real interest rate falls, and investment increases.
D) demand for loanable funds curve shifts rightward, the real interest rate rises, and investment decreases.
E) supply of loanable funds curve shifts leftward, the real interest rate falls, and investment decreases.