Suppose the market for loanable funds is in equilibrium. If disposable income increases, the equilibrium real interest rate and the quantity of loanable funds .
A) rises; increases
B) falls; increases
C) falls; decreases
D) rises; decreases

Question

Quizplus · Accepted Answer

An increase in disposable income typically leads to an increase in savings, which shifts the supply of loanable funds to the right. This results in a lower equilibrium real interest rate and an increase in the quantity of loanable funds.

Suppose the Market for Loanable Funds Is in Equilibrium