Figure 18-3.The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves.
-Refer to Figure 18-3.Which of the following movements shows the effects of a new law that makes more people than before eligible for Individual Retirement Accounts?

Question

Figure 18-3.The figure shows two demand-for-loanable-funds curves and two supply-of-loanable-funds curves. 
-Refer to Figure 18-3.Which of the following movements shows the effects of a new law that makes more people than before eligible for Individual Retirement Accounts?

Quizplus · Accepted Answer

This movement shows an increase in the supply of loanable funds due to the increased eligibility for IRAs, causing a decrease in the equilibrium interest rate (from r1 to r2) and an increase in the equilibrium quantity of funds borrowed and lent (from Q1 to Q2). Points A and B only show a movement along the same supply curve in response to changes in the demand curve. Point C to Point B only shows a movement along the same demand curve in response to changes in the supply curve.