If the real interest rate increases from 3 percent to 5 percent,
A) the nominal interest rate will also increase.
B) the demand for loanable funds curve will shift rightward.
C) the supply of loanable funds curve will shift rightward.
D) there will be a movement up along the demand for loanable funds curve.

Question

Quizplus · Accepted Answer

An increase in the real interest rate results in a movement up along the demand for loanable funds curve, as higher interest rates typically lead to a decrease in the quantity of loanable funds demanded.

If the Real Interest Rate Increases from 3 Percent to 5