In a business cycle recession, which of the following occurs?
A) The quantity of investment demanded increases and there is a movement down along the demand for loanable funds curve but no shift in the curve.
B) The quantity of investment demanded decreases and there is a rightward shift of the demand for loanable funds curve.
C) The quantity of investment demanded decreases and there is a movement up along the demand for loanable funds curve but no shift in the curve.
D) Investment demand increases and the demand for loanable funds curve shifts rightward.
E) Investment demand decreases and the demand for loanable funds curve shifts leftward.

Question

Quizplus · Accepted Answer

During a recession, businesses are less likely to invest due to lower expected returns, leading to a decrease in investment demand and a leftward shift in the demand for loanable funds curve.

In a Business Cycle Recession, Which of the Following Occurs