(Solved): Suppose that the government announces a policy to incentivize firms to invest more. At the same tim ...

Suppose that the government announces a policy to incentivize firms to invest more. At the same time, the government decreases its spending, causing a budget surplus. Which of the ollowing statements is true? A. The interest rate will increase; the effect on the amount of loanable funds exchanged is ambiguous B. The effect (direction of change) on both interest rate and quantity of loanable funds depends upon the size of the change in government spending C. The interest rate will increase; the supply of loanable funds will decrease D. The interest rate will stay the same; the supply of loanable funds will decrease E. None of the above