As the rises, the supply of loanable funds other things remaining the same.

Question

Quizplus · Accepted Answer

As the supply of loanable funds rises, it means there are more funds available for borrowing. With a larger supply of funds, lenders compete to lend these funds, leading to a decrease in the interest rate. However, this decrease in nominal interest rate may be offset by an increase in inflation, leading to no change or an increase in the real interest rate. Therefore, choice C is correct as the real interest rate may increase with a rise in supply of loanable funds.

As the Rises, the Supply of Loanable Funds Other Things