Figure 32-1
-Refer to Figure 32-1. If the real interest rate is 7 percent, the quantity of loanable funds demanded is
A)$70 billion, and the quantity supplied is $10 billion.
B)$10 billion, and the quantity supplied is $70 billion.
C)$10 billion, and the quantity supplied is $10 billion.

Question

Figure 32-1  ​
-Refer to Figure 32-1. If the real interest rate is 7 percent, the quantity of loanable funds demanded is
A)$70 billion, and the quantity supplied is $10 billion. 
B)$10 billion, and the quantity supplied is $70 billion. 
C)$10 billion, and the quantity supplied is $10 billion.

Quizplus · Accepted Answer

At a 7 percent real interest rate, the quantity of loanable funds demanded is lower than the quantity supplied because higher interest rates discourage borrowing and encourage saving.

Figure 32-1 ​

Figure 32-1