A decrease in the real interest rate leads to a the demand for loanable funds curve, and a decrease in the expected profit leads to a the demand for loanable funds curve.
A) movement down along; movement up along
B) rightward shift in; leftward shift in
C) movement down along; leftward shift in
D) rightward shift in; movement up along

Question

Quizplus · Accepted Answer

A decrease in the real interest rate leads to a movement down along the demand for loanable funds curve because borrowers are more willing to take out loans at a lower cost. On the other hand, a decrease in expected profit leads to a leftward shift in the demand for loanable funds curve because firms are less willing to invest and borrow at any given interest rate.

A Decrease in the Real Interest Rate Leads to a the Demand