Which of the following policy actions would unambiguously reduce the supply of loanable funds and crowd out investment?

A. A closed economy has income of $1,000, government spending of $200, taxes of $150, and investment of $250. What is private saving?

 

a. $100

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b. $200

c. $300

d. $400

B. I f a popular TV show on personal finance convinces Americans to save more for retirement, the _________ curve for loanable funds would shift, driving the equilibrium interest rate _________.

a. supply; up

b. supply; down

c. demand; up

d. demand; down

C. I f the business community becomes more optimistic about the profitability of capital, the _________ curve for loanable funds would shift, driving the equilibrium interest rate _________.

a. supply; up

b. supply; down

c. demand; up

d. demand; down

D. Which of the following policy actions would unambiguously reduce the supply of loanable funds and crowd out investment?

a. an increase in taxes and a decrease in government spending

b. a decrease in taxes together with an increase in government spending

c. an increase in both taxes and government spending

d. a decrease in both taxes and government spending

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