If saving falls during booming times in the economy, then the equilibrium real interest rate _____ and the quantity of loanable funds _____.
A) falls; rises
B) rises; falls
C) falls; falls
D) rises; rises

Question

Quizplus · Accepted Answer

During booming times in the economy, people and businesses have more income and are able to save more money. This causes the supply of loanable funds to increase, shifting the supply curve to the right. As a result, the equilibrium real interest rate rises and the quantity of loanable funds falls.

If Saving Falls During Booming Times in the Economy, Then