The explanation for the slope of
A)the supply of loanable funds curve is based on the logic that a higher real interest rate leads to higher saving.
B)the demand for loanable funds curve is based on the logic that a higher interest rate leads to higher saving.
C)the supply of loanable funds curve is based on the logic that a higher real interest rate leads to lower saving.
D)the demand for loanable funds curve is based on the logic that a higher interest rate leads to lower saving.

Question

Quizplus · Accepted Answer

The slope of the supply of loanable funds curve is upward-sloping because a higher real interest rate incentivizes individuals to save more. As the interest rate rises, the opportunity cost of spending increases, so individuals are more likely to save their money in interest-bearing accounts. This results in an increased supply of loanable funds, which is represented by the upward-sloping supply of loanable funds curve.

The Explanation for the Slope of