A rise in the real interest rate
A) shifts the demand for loanable funds curve rightward.
B) shifts the demand for loanable funds curve leftward.
C) creates a movement upward along the demand for loanable funds curve.
D) creates a movement downward along the demand for loanable funds curve.

Question

Quizplus · Accepted Answer

A rise in the real interest rate does not shift the demand curve for loanable funds but rather causes a movement along the demand curve. This is because the interest rate is a price for borrowing funds, and a change in the price leads to a change in the quantity demanded, represented by a movement along the curve.

A Rise in the Real Interest Rate