A decrease in the demand for loanable funds occurs when
A)the government cuts taxes.
B)government expenditure increases.
C)expected profit decreases.
D)expected profit increases.
E)the real interest rate rises.

Question

Quizplus · Accepted Answer

If expected profit decreases, it means that investment becomes less attractive and firms will demand fewer loanable funds to invest. This shift leads to a decrease in the demand for loanable funds.

A Decrease in the Demand for Loanable Funds Occurs When