When the real interest rate increases
A) the supply of loanable funds curve shifts rightward.
B) the supply of loanable funds curve shifts leftward.
C) there is a movement upward along the supply of loanable funds curve.
D) there is a movement downward along the supply of loanable funds curve.

Question

Quizplus · Accepted Answer

An increase in the real interest rate does not shift the supply curve of loanable funds but rather results in a movement along the supply curve. Specifically, it causes a movement upward along the curve as suppliers are willing to lend more at higher rates.

When the Real Interest Rate Increases