Suppose that consumers decide to save less and spend more. What effect would this have in the market for loanable funds?
A)It will increase interest rates and the quantity of funds lent will rise.
B)It will decrease interest rates and the quantity of funds lent will rise.
C)It will increase interest rates and the quantity of funds lent will fall.
D)It will decrease interest rates and the quantity of funds lent will fall.

Question

Quizplus · Accepted Answer

When consumers save less, the supply of loanable funds decreases, leading to higher interest rates and a lower quantity of funds lent.

Suppose That Consumers Decide to Save Less and Spend More