An increase in the real interest rate ________ the quantity of loanable funds supplied and ________ the quantity of loanable funds demanded.
A) increases; increases
B) increases; decreases
C) decreases; increases
D) decreases; decreases

Question

Quizplus · Accepted Answer

An increase in the real interest rate makes saving more attractive, which increases the quantity of loanable funds supplied. Conversely, it makes borrowing more expensive, which decreases the quantity of loanable funds demanded.

An Increase in the Real Interest Rate ________ the Quantity