A change in inflationary expectations will influence
A) the supply of loanable funds only.
B) the demand for loanable funds only.
C) neither the supply nor demand for loanable funds.
D) both the supply and demand for loanable funds.

Question

Quizplus · Accepted Answer

A change in inflationary expectations will affect both borrowers and lenders. Borrowers will demand more funds to buy goods and services before prices rise, thus increasing the demand for loanable funds. Lenders, on the other hand, will adjust their supply of loanable funds to reflect the expected level of inflation, which can either increase or decrease the supply of loanable funds. Therefore, a change in inflationary expectations will affect both the supply and demand for loanable funds.

A Change in Inflationary Expectations Will Influence