Interest rate (%) 30 27 24 E O 200 400 600 800 1,000 1,200 Quantity of loanable funds (billions of dollars) Reference: Ref 10-13 Figure: Loanable Funds Market Ill (Figure: Loanable Funds Market III) Use Figure: Loanable Funds Market III. If the government in a closed economy finances deficits by selling bonds and it decides to decrease defence spending by $200 billion, the decrease in government spending will encourage _ in additional private investment spending. Select one: X O a. $400 billion O b. $200 billion O c. $100 billion O d. $10 billion The correct answer is: $100 billion