A rise in the real interest rate
A)shifts the demand for loanable funds curve rightward.
B)shifts the demand for loanable funds curve leftward.
C)creates a movement down along the demand for loanable funds curve.
D)creates a movement up along the demand for loanable funds curve.
E)increases the inflation rate.

Question

Quizplus · Accepted Answer

A rise in the real interest rate does not shift the demand curve for loanable funds but creates a movement along the curve. Specifically, it causes a movement up along the demand curve as it becomes more expensive to borrow, reducing the quantity of loanable funds demanded.

A Rise in the Real Interest Rate