-In the above figure, the economy is at point a on the initial supply of loanable funds curve SLF₀. What happens if the real interest rate rises? A) Nothing; the economy would remain at point a. B) There would be a movement to a point such as b on supply of loanable funds curve SLF₀. C) The supply of loanable funds curve would shift rightward to a curve such as SLF₂. D) The supply of loanable funds curve would shift leftward to a curve such as SLF₁.

Question

Quizplus · Accepted Answer

A rise in the real interest rate would not shift the supply curve of loanable funds but would result in a movement along the existing supply curve to a higher interest rate level, such as point b.

-In the Above Figure, the Economy Is at Point a on the Initial