-In the above figure, the initial supply of loanable funds curve is SLF₀and the initial demand for loanable funds curve is DLF₀. An economic expansion that raises disposable income and the expected profit would

Question

-In the above figure, the initial supply of loanable funds curve is SLF<sub>0 </sub>and the initial demand for loanable funds curve is DLF<sub>0</sub>. An economic expansion that raises disposable income and the expected profit would A) only shift the demand for loanable funds curve rightward to a curve such as DLF<sub>1</sub>. B) have no effect on either the demand for loanable funds curve or the supply of loanable funds curve. C) shift the supply of loanable funds curve rightward to a curve such as SLF<sub>1</sub>, and shift the demand for loanable funds curve rightward to a curve such as DLF<sub>1</sub>. D) only shift the supply of loanable funds curve rightward to a curve such as SLF<sub>1</sub>.

Quizplus · Accepted Answer

An economic expansion increases disposable income, leading to more savings and thus shifting the supply of loanable funds rightward. It also increases expected profits, encouraging more borrowing and shifting the demand for loanable funds rightward.

-In the Above Figure, the Initial Supply of Loanable Funds