Other things the same, an increase in the interest rate makes the quantity of loanable funds demanded
A)rise, and investment spending rise.
B)rise, and investment spending fall.
C)fall, and investment spending rise.
D)fall, and investment spending fall.

Question

Quizplus · Accepted Answer

An increase in the interest rate makes borrowing more expensive, which decreases the quantity of loanable funds demanded and reduces investment spending, as firms are less likely to borrow money for investment projects when interest rates are high.

Other Things the Same, an Increase in the Interest Rate