-In the above figure, the economy is at point a on the initial supply of loanable funds curve SLF₀. What happens if the interest rate rises? A) There is a movement to a point such as b on supply of loanable funds curve SLF₀. B) The supply of loanable funds curve shifts rightward to a curve such as SLF₂. C) The supply of loanable funds curve shifts leftward to a curve such as SLF₁. D) none of the above

Question

Quizplus · Accepted Answer

When the interest rate rises, there is a movement along the supply of loanable funds curve, not a shift. Therefore, the economy moves to a different point on the same curve, such as point b on SLF₀.

-In the Above Figure, the Economy Is at Point a on the Initial