-In the above figure, the economy is at point a on the initial demand for loanable funds curve DLF0. What happens if the real interest rate rises?
A)The demand for loanable funds curve shifts leftward to a curve such as DLF1.
B)The demand for loanable funds curve shifts rightward to a curve such as DLF2.
C)There is a movement to a point such as b on the demand for loanable funds curve DLF0.
D)None of the above

Question

-In the above figure, the economy is at point a on the initial demand for loanable funds curve DLF0. What happens if the real interest rate rises?
A)The demand for loanable funds curve shifts leftward to a curve such as DLF1. 
B)The demand for loanable funds curve shifts rightward to a curve such as DLF2. 
C)There is a movement to a point such as b on the demand for loanable funds curve DLF0. 
D)None of the above

Quizplus · Accepted Answer

A rise in the real interest rate causes a movement along the demand for loanable funds curve, not a shift of the curve itself.

-In the Above Figure, the Economy Is at Point a on the Initial