Suppose that there is an increase in disposable income and simultaneously an increase in the expected profitability of investment. As a result, the equilibrium real interest rate _{--------------------}and the Equilibrium quantity of loanable funds_{--------------------}_{--------------------} . A)might rise, fall, or remain unchanged; increases B)might rise, fall, or remain unchanged; decreases C)rises; increases D)remains unchanged; increases E)falls; increases

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An increase in disposable income increases savings, shifting the supply of loanable funds to the right. An increase in expected profitability of investment increases demand for loanable funds, shifting the demand curve to the right. The equilibrium real interest rate might rise, fall, or remain unchanged depending on the relative shifts of supply and demand, but the equilibrium quantity of loanable funds will increase.

Suppose That There Is an Increase in Disposable Income and Simultaneously