Suppose the real interest rate rises and the quantity of loanable funds increases. These changes could have been the result of
A) firms expecting higher future profits.
B) firms expecting lower future profits.
C) households expecting higher future income.
D) in increase in the default risk.

Question

Quizplus · Accepted Answer

When firms expect higher future profits, they are more likely to invest, increasing the demand for loanable funds, which can lead to a rise in the real interest rate and an increase in the quantity of loanable funds.

Suppose the Real Interest Rate Rises and the Quantity of Loanable