-In the above figure, the economy is at point a on the initial supply of loanable funds curve SLF₀. What happens if the real interest rate rises? A) The supply of loanable funds curve would shift leftward to a curve such as SLF₁. B) Nothing; the economy would remain at point a. C) The supply of loanable funds curve would shift rightward to a curve such as SLF₂. D) There would be a movement to a point such as b on supply of loanable funds curve SLF₀.

Question

Quizplus · Accepted Answer

When the real interest rate rises, there is a movement along the supply curve of loanable funds, not a shift. This means the economy would move to a new point on the same curve, such as point b.

-In the Above Figure, the Economy Is at Point a on the Initial