A fall in the real interest rate
A) has no effect on the demand for loanable funds curve
B) results in a movement along the demand for loanable funds curve.
C) shifts the demand for loanable funds curve leftward.
D) shifts the demand for loanable funds curve rightward.

Question

Quizplus · Accepted Answer

A fall in the real interest rate causes a movement along the demand for loanable funds curve because it leads to an increase in the quantity of loanable funds demanded. A shift in the demand for loanable funds curve would occur from a change in factors other than the interest rate, such as changes in consumer preferences or business investment opportunities.

A Fall in the Real Interest Rate