As the real interest rate falls
A) the demand for loanable funds rises.
B) the quantity demanded of loanable funds rises.
C) the demand for loanable funds falls.
D) less funds are demanded.

Question

Quizplus · Accepted Answer

The real interest rate is the cost of borrowing. When it falls, it becomes cheaper to borrow money, so the quantity demanded of loanable funds rises. This is a movement along the demand curve, not a shift of the demand curve itself.

As the Real Interest Rate Falls