A decrease in the real interest rate leads to
A) an increase in investment demand so that the demand for loanable funds curve shifts rightward.
B) a fall in the capital stock.
C) an increase in the expected profit.
D) a movement downward along the demand for loanable funds curve.

Question

Quizplus · Accepted Answer

A decrease in the real interest rate makes borrowing cheaper, leading to a movement downward along the demand for loanable funds curve as more funds are demanded at lower rates.

A Decrease in the Real Interest Rate Leads to