As the interest rate increases, the quantity of loanable funds demanded .
A) real; decreases
B) real; increases
C) nominal; decreases
D) nominal; increases

Question

Quizplus · Accepted Answer

When interest rates increase, the cost of borrowing funds increases. This means that businesses and individuals may choose to invest less or postpone borrowing, leading to a decrease in the quantity of loanable funds demanded. This is a real change because it is a change in the actual amount of funds borrowed, not just a change in the nominal value.

As the Interest Rate Increases, the Quantity of Loanable Funds