An increase in the real interest rate ________ the quantity of loanable funds supplied and ________the quantity of loanable funds demanded.
A)decreases; decreases
B)increases; decreases
C)increases; increases
D)decreases; increases

Question

Quizplus · Accepted Answer

An increase in the real interest rate makes saving more attractive, thus increasing the quantity of loanable funds supplied. Conversely, it makes borrowing more expensive, thus decreasing the quantity of loanable funds demanded.

An Increase in the Real Interest Rate ________ the Quantity