-In the above figure, the demand for loanable funds curve is drawn for the average expected profit. If the real interest rate is constant at 6 percent and the expected profit rises, the amount of loanable funds demanded will be
A) less than $450 billion.
B) $450 billion.
C) between $300 billion and $450 billion.
D) greater than $450 billion.

Question

-In the above figure, the demand for loanable funds curve is drawn for the average expected profit. If the real interest rate is constant at 6 percent and the expected profit rises, the amount of loanable funds demanded will be
A) less than $450 billion. 
B) $450 billion. 
C) between $300 billion and $450 billion. 
D) greater than $450 billion.

Quizplus · Accepted Answer

When the expected profit rises, businesses are more willing to borrow money to invest in projects because they anticipate higher returns. This increases the demand for loanable funds, shifting the demand curve to the right. Therefore, at a constant interest rate of 6 percent, the amount of loanable funds demanded would be greater than $450 billion.

-In the Above Figure, the Demand for Loanable Funds Curve