Suppose the real interest rate rises and the quantity of loanable funds decreases. These changes could have been the result of
A)an increase in household wealth.
B)a decrease in the default risk.
C)an increase in disposable income.
D)firms expecting higher future profits.

Question

Quizplus · Accepted Answer

An increase in household wealth can lead to a decrease in savings, reducing the supply of loanable funds, which can cause the real interest rate to rise and the quantity of loanable funds to decrease.

Suppose the Real Interest Rate Rises and the Quantity of Loanable