Suppose government expenditures on goods and services and net taxes both decrease, and expenditures fall by more than net taxes. The effects of these changes on the budget deficit cause .

the equilibrium interest rate to fall and the equilibrium quantity of loanable funds to rise.  

Explanation:

Suppose government expenditures on goods and services and net taxes both decrease, and expenditures fall by more than net taxes. The effects of these changes on the budget deficit cause the equilibrium interest rate to fall and the equilibrium quantity of loanable funds to rise.  If government expenditures falls more than net tax, the effect on budget deficit is that there will be more funds available than the demand bringing about an increase in money available for loans which will result in a fall in  interest rates.

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