Figure 11-1
-Refer to Figure 11-1. Suppose the Fed takes action that shifts the demand curve from D to D′, as illustrated in Panel (a). As a result, the interest rate

Question

Figure 11-1 
-Refer to Figure 11-1. Suppose the Fed takes action that shifts the demand curve from D to D′, as illustrated in Panel (a). As a result, the interest rate

Quizplus · Accepted Answer

The demand curve for loanable funds shifts to the right from D to D', which means that there is an increase in the quantity of loanable funds demanded at each interest rate. This leads to a decrease in the interest rate, which in turn leads to an increase in investment.