If households believe their incomes will fall in the future, the result is a
A) movement along the supply of loanable funds curve.
B) movement along the demand for loanable funds curve.
C) leftward shift in the supply of loanable funds curve.
D) rightward shift in the supply of loanable funds curve.

Question

Quizplus · Accepted Answer

If households expect their incomes to fall in the future, they are likely to save more now to prepare for the anticipated decrease in income. This increase in savings leads to a rightward shift in the supply of loanable funds curve.

If Households Believe Their Incomes Will Fall in the Future