If the supply of loanable funds shifts left,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

If the supply of loanable funds shifts left, it means that there are less funds available for lending. This will cause an increase in the demand for loanable funds, leading to an increase in the real interest rate. At the same time, the equilibrium quantity of loanable funds will decrease as lenders are willing to lend less at the higher interest rate. Therefore, the best choice is D, where the real interest rate rises and the equilibrium quantity of loanable funds falls.

If the Supply of Loanable Funds Shifts Left,then