The supply curve for loanable funds would decline due to
A)an increase in wealth.
B)an increase in the expected return on bonds.
C)an increase in expected inflation.
D)a decrease in the riskiness of bonds relative to other assets.

Question

Quizplus · Accepted Answer

An increase in expected inflation would lead to a decline in the supply of loanable funds because as inflation expectations rise, the real value of the money that lenders would get back in the future decreases. This makes lending less attractive, leading to a decrease in the supply of loanable funds.

The Supply Curve for Loanable Funds Would Decline Due to