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 real interest rate falls.
C) the pool of loanable funds falls.
D) the expected profit from investment decreases.

Question

Quizplus · Accepted Answer

A decrease in the real interest rate makes borrowing cheaper, which encourages more borrowing and a greater demand for loanable funds, resulting in a movement downward along the demand curve. Business expectations, the pool of loanable funds, and expected profit from investment can all affect the demand for loanable funds, but they do not directly lead to a movement downward along the demand curve.

The Quantity of Loanable Funds Demanded Increases So There Is