Which of the following is TRUE?
I. As the real interest rate increases, people increase the quantity they save.
II. The supply of loanable funds curve is downward sloping.
III. As disposable income increases, the supply of loanable funds curve becomes steeper.
A) I and III
B) II and III
C) I only
D) III only

Question

Quizplus · Accepted Answer

I is true because higher real interest rates make saving more attractive, leading to an increase in the quantity saved. II is incorrect because the supply of loanable funds curve is upward sloping, reflecting that higher interest rates incentivize more savings. III is incorrect because an increase in disposable income shifts the supply of loanable funds curve outward, not making it steeper.

Which of the Following Is TRUE