If the credit supply curve of an economy shifts to the left and the credit demand curve remains unchanged,________.
A) its real interest rate will rise
B) its real interest rate will fall
C) its real output will increase
D) its real unemployment level will fall

Question

Quizplus · Accepted Answer

If the credit supply curve shifts to the left, there will be less credit available in the economy, leading to an increase in the cost of credit. This increase in the cost of credit will cause the real interest rate to rise, making borrowing more expensive, reducing investment and consumption, and potentially leading to a decline in output and employment. Therefore, choice A (its real interest rate will rise) is the most appropriate answer. The other options are unlikely outcomes when the credit supply shifts to the left.

If the Credit Supply Curve of an Economy Shifts to the Left