Which of the following is true? I.As the real interest rate increases, people increase the quantity they save.
II.The supply of loanable funds curve is downward sloping.
III.As disposable income increases, the supply of loanable funds curve becomes steeper.
A)II and III only
B)I only
C)III only
D)I and III only
E)I, II, and III

Question

Quizplus · Accepted Answer

As the real interest rate increases, the incentive to save increases, but this does not necessarily mean that the quantity of savings will increase. Therefore, statement I is false. The supply of loanable funds curve is upward sloping, not downward sloping, so statement II is also false. The slope of the supply of loanable funds curve does not depend on disposable income, so statement III is false.

Which of the Following Is True? I