Technological progress that increases the expected profit shifts the demand for loanable funds curve
A) leftward and reduces the real interest rate.
B) rightward and increases the real interest rate.
C) rightward and reduces the real interest rate.
D) leftward and increases the real interest rate.

Question

Quizplus · Accepted Answer

Technological progress increases the expected profit from investments, leading firms to demand more loanable funds for investment purposes. This increased demand shifts the demand curve for loanable funds to the right, which typically results in a higher real interest rate as the supply of loanable funds initially remains unchanged.

Technological Progress That Increases the Expected Profit Shifts the Demand