Lumen OHM Assessment

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Consider the supply and demand diagrams for the financial market with interest rates on the vertical axis and quantity of financial capital on the horizontal axis.

Suppose that the government runs a significant budget deficit.

Which graph would most accurately predict the changes observed in the financial market as a result of this budget deficit?

Note that the new curve is shown in gray.

D curve shifts left:

D curve shifts right:

S curve shifts right:

S curve shifts left:

Hint

Suppose that the government of China is running a large budget deficit.

As a result of this, what will happen to the interest rates in China?

Interest rates will decrease.
Interest rates will increase.
Interest rates will remain the same.

Hint

Suppose that the government of China is running a large budget deficit.

As a result of this, what will happen to the Investment (I) and Consumption (C) in China?

Investment and consumption will decrease.
Investment and consumption will increase.
Investment and consumption will remain the same.

Hint