The quantity of loanable funds demanded increases so there is a movement downward along the demand for loanable funds curve when
A) business expectations become more optimistic.
B) the pool of loanable funds falls.
C) the expected profit from investment decreases.
D) the real interest rate falls.

Question

Quizplus · Accepted Answer

As the real interest rate falls, borrowing becomes cheaper and more attractive, leading to an increase in the quantity of loanable funds demanded. This causes a movement downward along the demand for loanable funds curve. Business expectations, the pool of loanable funds, and expected profit from investment all affect the demand for loanable funds, but their impact on the quantity demanded is not consistent and could lead to a shift in the entire demand curve rather than just a movement along it.

The Quantity of Loanable Funds Demanded Increases So There Is