A decrease in the real interest rate leads to a the demand for loanable funds curve, and a decrease in the expected profit leads to a the demand for loanable funds curve.
A) movement down along; movement up along
B) movement down along; leftward shift in
C) rightward shift in; leftward shift in
D) rightward shift in; movement up along

Question

Quizplus · Accepted Answer

A decrease in the real interest rate leads to a movement down along the demand for loanable funds curve because at lower interest rates, more firms and individuals are willing to borrow for investment opportunities. On the other hand, a decrease in the expected profit leads to a leftward shift in the demand for loanable funds curve because firms are less willing to borrow for investment when they expect lower returns.

A Decrease in the Real Interest Rate Leads to a the Demand