If the supply of loanable funds shifts right,then
A)the real interest rate and the equilibrium quantity of loanable funds both fall.
B)the real interest rate falls and the equilibrium quantity of loanable funds rises.
C)the real interest rate and the equilibrium quantity of loanable funds both rise.
D)the real interest rate rises and the equilibrium quantity of loanable funds falls.

Question

Quizplus · Accepted Answer

When the supply of loanable funds shifts right, it means that there are more funds available for lending at any given interest rate. This leads to an increase in the quantity of loanable funds demanded by borrowers, resulting in a rightward shift of the demand curve. The equilibrium real interest rate falls as a result, as the increase in supply drives down the cost of borrowing. Additionally, the equilibrium quantity of loanable funds rises, as more funds are supplied and demanded in the market. Therefore, the correct choice is B, where the real interest rate falls and the equilibrium quantity of loanable funds rises.

If the Supply of Loanable Funds Shifts Right,then