A fall in the real interest rate
A)shifts the demand for loanable funds curve rightward.
B)decreases the inflation rate.
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)shifts the demand for loanable funds curve leftward.

Question

Quizplus · Accepted Answer

A fall in the real interest rate does not shift the demand curve for loanable funds but rather creates a movement along the curve. Specifically, it causes a movement down along the demand curve because lower interest rates make borrowing more attractive, increasing the quantity of loanable funds demanded at the existing interest rate.

A Fall in the Real Interest Rate