The graph shown displays the market for loanable funds in an economy. If the quantity people want to save increases, at any given interest rate, a new equilibrium would occur at a _______ interest rate and a _______ equilibrium quantity of funds saved and invested.
A) lower; higher
B) higher; higher
C) lower; constant
D) higher; constant

Question

The graph shown displays the market for loanable funds in an economy.  If the quantity people want to save increases, at any given interest rate, a new equilibrium would occur at a _______ interest rate and a _______ equilibrium quantity of funds saved and invested.
A) lower; higher 
B) higher; higher 
C) lower; constant 
D) higher; constant

Quizplus · Accepted Answer

If the quantity people want to save increases, the supply of loanable funds will increase, causing the supply curve to shift to the right. This will result in a new equilibrium where the interest rate is lower and the equilibrium quantity of funds saved and invested is higher. Choice A represents this scenario correctly.

The Graph Shown Displays the Market for Loanable Funds in an Economy