Which of the following is true?
I. As the real interest rate increases, people increase the quantity they save.
II. The supply of loanable funds curve is downward sloping.
III. As disposable income increases, the supply of loanable funds curve becomes steeper.

Question

Quizplus · Accepted Answer

Option I is incorrect as with an increase in the real interest rate, people tend to reduce their quantity saved as they get more incentive to spend. Option II is also incorrect as the supply of loanable funds curve is upward-sloping because as the interest rate increases, the quantity supplied of loanable funds also increases. Option III is likely incorrect as disposable income would impact the demand for loanable funds, not the supply.

Which of the Following Is True